Yesterday, September 17, 2019, eight U.S. Senators sent a letter to the Federal Trade Commission (FTC) urging it to thoroughly investigate the pharmaceutical mergers of AbbVie and Allergan and Bristol Myers-Squibb and Celgene. The Senators wrote that both mergers "raise significant antitrust issues" and that the FTC "should take appropriate action to protect consumers from acquisitions that may threaten competition in drug markets, raise drug prices, or reduce patient access to essential medicines."
The letter was signed by Senators Amy Klobuchar, Richard Blumenthal, Cory Booker, Mazie Hirono, Kamala Harris, Elizabeth Warren, Tammy Baldwin, Tina Smith, and Bernie Sanders. Four of the Democratic Senators who signed are running for President.
The $63 billion AbbVie-Allergan merger would create one of the largest drug companies in the world, likely reduce innovation and increase prices, and harm competition and consumers. The $74 billion merger of Bristol Myers-Squibb and Celgene is even bigger and would have similar effects. And the past few years have seen a frenzy of mergers and acquisitions in the pharmaceutical industry. In both of these mergers, the companies have announced they will divest certain drugs in order to avoid anticompetitive concerns.
Drug companies claim that the mergers will benefit everybody. But there are good reasons to be skeptical. The Senators write that "research has shown that pharmaceutical mergers may have a negative effect on innovation by reducing the competition to discover new therapies. More specifically, reports that AbbVie is planning $1 billion in research and development budget cuts to pay off debt after the merger closes, which does not bode well for innovation at the combined company going forward. If these mergers reduce innovation, competition and patients will suffer."
You don't need a PhD to tell that if a drug company claims that an acquisition of another company will boost innovation, and then cuts funding for the research that drives that innovation, something is fishy.
Moreover, the combined AbbVie-Allergan and Bristol-Myers-Celgene companies would wield immense market power. They could and would likely use their power to condition buyers' access to their expensive drugs on purchases of less popular drugs in their portfolios. The companies could also use "rebate walls" to secure favorable positions on buyers' drug formularies.
The nine Senators urge the FTC to dig deep and take a hard look at these mergers. Any settlements should be effective at protecting competition that would be harmed by these deals. And if that is not possible, the FTC should file suit to block the mergers.
We completely agree with this letter, and we hope the FTC takes their words to heart.