The Federal Trade Commission and attorneys general from six states – California, Illinois, Minnesota, New York, Washington, and Wisconsin – joined in heralding news of an agreement that gives the green light to drug giant Amgen Inc.’s nearly $29 billion acquisition of Horizon Therapeutics plc. However, the conditions of the settlement do little to safeguard competition in the vitally important pharmaceutical industry.
The government enforcers challenged the deal on the grounds that it would give Amgen considerable leverage to use its brawny portfolio to pressure insurance companies and pharmacy benefit managers to favor Horizon’s two “monopoly products.” The drugs are Tepezza, used to treat thyroid disease, and Krystexxa, prescribed to treat chronic refractory gout. This would disadvantage producers of rival medications, the government attorneys argued.
Under the terms of the proposed consent order, Amgen may not:
Bundle an Amgen product with either Tepezza or Krystexxa.
Condition any product rebate or contract terms related to an Amgen product on the sale or positioning either drug.
Use any product rebate or contract term to exclude or disadvantage any product that would compete with Tepezza or Krystexxa.
Enter into any agreement or understanding to acquire any products or interest in any business engaged in the manufacturing or sale of any products, biosimilars, or therapeutic equivalents that treat either of the two diseases without FTC approval.
Amgen must seek FTC approval before acquiring any pre-commercial products that have completed FDA clinical trials to treat either thyroid eye disease or chronic refractory gout. Further, Amgen is required seek FTC prior approval and notify the states of any such requests through 2032. All other conditions of the consent order are to remain in effect for 15 years.
Restrictions are merely facially appealing.
It is particularly important to safeguard competition among pharmaceutical companies. Competition leads to increased innovation and product quality, which saves lives and improves the quality of life for millions of people. However, due to the monopolies created through patent protection and the billions of dollars in profits patent-protected drugs can generate annually, this industry has been plagued by anticompetitive conduct by companies trying to maintain their monopolies (e.g., pay-for-delay). And, like most industries in the U.S., the pharmaceutical industry has become increasingly concentrated largely due to serial acquisitions by its largest players, including Amgen. This not only harms competition among existing firms but also fortifies the already significant barriers to entry facing potential competitors.
Unfortunately, despite some facially appealing restrictions, the consent decree does little to safeguard competition among pharmaceutical companies. Instead, the consent decree prohibits a specific set of conduct that is largely unlawful under the antitrust laws already. For example, the consent decree prohibits Amgen from bundling its products with either Tepezza or Krystexxa. But, assuming these bundles would be created to protect Amgen’s monopolies, they would likely constitute unlawful discount bundling in violation of Section 2 of the Sherman Act. Likewise, the consent decree prohibits Amgen from acquiring drugs that treat the same diseases as Tepezza or Krystexxa. But Amgen will be a monopolist in those markets following the merger, meaning any acquisition in the foreseeable future of a competing drug would likely constitute an anticompetitive merger in violation Section 7 of the Clayton Act.
The consent decree, therefore, does little more than remind Amgen that certain conduct is unlawful following the merger.