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FTC’s current approach to pharmaceutical merger enforcement is too lax.

Public comment to FTC re Pharma.dabfinal
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On June 25, 2021, Consumer groups and unions including Families USA, Public Interest Research Group, Services Employees International Union (SEIU), American Federation of State, County and Municipal Employees (AFSCME),Consumer Action, Alliance for Retired Americans, Doctors for America, Social Security Works, and Treatment Action Group, urged the FTC to adopt a new paradigm on how it evaluates the competitive effects of pharmaceutical mergers. The Commission has been able to adopt new paradigms in several markets when its existing approach failed to fully protect competition and those examples should serve as a model for the task at hand. The basic points in their comments are:

• The FTC should use a reinvigorated and broader look when evaluating pharmaceutical mergers, which expands beyond the limited examination of therapeutic overlaps that has historically resulted in either divestitures of individual products or no action at all.

• The FTC should adapt its approach to consider potential “portfolio” effects, that a merger by consolidating groups of drugs, or skill areas, may enhance the ability to exercise market power beyond individual product overlaps. This is especially a concern for overall innovation and research and development (“R&D”). In addition, the FTC should intensely scrutinize potential killer acquisitions.

• The FTC should broaden its analysis and scrutinize potential or ongoing anticompetitive conduct and take action to stop that conduct. Anticompetitive conduct is endemic in the pharmaceutical market, yet the Commission’s approach seems to ignore that conduct in its merger investigations. For example, in the recent Abbvie-Allergan merger the staff appeared to ignore the clear evidence of ongoing anticompetitive conduct, which would be exacerbated by the merger in spite of the fact that nine U.S. Senators and numerous unions and consumer groups raised that as a critical competitive concern.

• The FTC should take a stronger, more comprehensive approach to merger remedies. The FTC must assure that remedies are fully effective in restoring competition. Currently, the FTC does not ask the tough questions necessary when it evaluates divestitures and divestiture buyers. Moreover, there is little to no evidence that divestitures of individual products or assets to divestiture buyers restore competition.

• The FTC must have an independent assessment on whether its remedies in pharma mergers actually perform its statutory obligation in fully restoring competition. As we detail within, the FTC misguidedly claims a 100% success record in pharma merger remedies in its 2017 divestiture study. There is simply no systematic analysis of whether pharma remedies work. The FTC must conduct a comprehensive objective review of its merger remedies to determine whether they are truly effective.

• The FTC must litigate. The FTC expends perhaps more resources on pharma mergers than practically any other market. Yet it has almost never gone to court to challenge a merger. This alone suggests the threshold for challenging mergers is too high. Moreover, it means that the FTC, not the courts, are the sole source of pharma merger “jurisprudence.”3

These comments elaborate on what new and evolving theories of harm that the agencies should consider when evaluating pharmaceutical mergers; the consideration of anticompetitive practices as part of the merger analysis; what evidence is necessary to support these new theories of harm; and the types and scope of structural and behavioral remedies that

should be used to restore competition. And, finally, the groups strongly agree with Commissioner Rohit Chopra’s sound recommendations to increase the rigor of the FTC’s merger investigations

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