The Merger of AbbVie and Allergan Is A Bad Idea for Consumers
Just last month, the drug company AbbVie announced that it was going to acquire Allergan, the drug company that makes Botox, for $63 billion in one of the largest mergers in the healthcare industry. This megamerger is a bad idea for consumers, competition, and affordable prescription drugs. The Federal Trade Commission should take a careful look at this transaction, and block the merger if it harms consumers.
The New York Times reported that "consolidation has been transforming the health care landscape, particularly as large insurers join with pharmacy benefit managers, like the recent mergers of Cigna and Express Scripts, and CVS and Aetna." Just a few days ago we testified against the CVS-Aetna merger on behalf of Consumer Action and U.S. PIRG, and urged Judge Richard Leon to reject the proposed final judgment and institute remedies to protect consumer welfare.
The proposed merger of AbbVie and Allergan would reward anticompetitive behavior on the part of both companies. AbbVie manufactures Humira, a treatment for rheumatoid arthritis and the world's best-selling drug which has earned over $130 billion since it entered the market in 2003. In order to stifle competition from other drugs, AbbVie holds 136 patents on Humira and various stages of its development-a patent thicket. A recent lawsuit by Local 1500 of the United Food and Commercial Workers (a major union) pointed out that "AbbVie has erected significant barriers to entry to block biosimilar competition...Specifically, AbbVie has created and employed an exclusionary 'patent thicket' —an unlawful scheme whereby it secured over 100 patents designed solely to insulate Humira from any biosimilar competition in the U.S. for years to come."
And Allergan's behavior has been even worse. Back in 2017, this company attempted to keep prices for its eye drug Restasis high by selling the patents to a Native American tribe in order to ward off a patent challenge. Fortunately that stunt failed after the courts ruled against it. But Allergan has engaged in numerous other anticompetitive practices, including rebate walls. Mr. Balto previously described this case, writing that "Shire was unsuccessful in penetrating the Medicare Part D market with Xiidra, used to treat dry-eye disease, which by all accounts is a better alternative than Allergan’s Restasis. Allergan’s rebates on Restasis were bundled with a broader portfolio of drugs so Medicare Part D plans lacked the financial incentives to purchase Xiidra instead of Restasis. He urged the FTC to stop these anticompetitive behaviors.
Both companies have manipulated the patent system and exploited loopholes in order to prolong their exclusive periods and keep drug prices high. American consumers have suffered as a result, in the form of higher prices and fewer competitive options. And now AbbVie and Allergan, having done all this without significant consequences, want to join forces and become even larger!
Past evidence has shown that massive healthcare mergers, whether in the PBM, drug company, or health insurance markets, rarely result in benefits for consumers. Instead they usually lead to higher prices, lower quality of good and services, and less competition. The drug manufacturer market has also seen a wave of consolidation over the last few years. In 2018, mergers and acquisitions in this industry were worth $265 billion, up more than 25% from 2017.
The Federal Trade Commission should carefully investigate the AbbVie and Allergan merger, and hear from consumer groups and advocates for affordable prescription drugs about its likely impacts. And the FTC should not hesitate to block the merger if it is anticompetitive.