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Consumer Groups and Unions Tell FTC: AbbVie-Allergen Merger Will Deny Access to More Effective and Affordable Drugs

In a September 13, 2019 letter, seventeen consumer advocacy groups and unions (led by Public Citizen Inc.) sent a clear message to the Federal Trade Commission: investigate and, if necessary, terminate AbbVie Inc.’s acquisition of Allergan PLC or risk restricting consumers’ access to lower-priced pharmaceuticals, limiting innovation, and reducing competition. These groups explained their “hope” was that this investigation would be part “of a reinvigorated broader look at pharmaceutical drug mergers.”

AbbVie announced in June that it would acquire Dublin-based Allergan for $63 billion in cash and stock. This acquisition gives AbbVie a dominant position in the eye-treatment and beauty drug industry post-merger, which includes the widely used Botox neurotoxin. In 2017 alone, Botox generated nearly $3.2 billion in revenue worldwide, with some predicting it will generate more than $4.5 billion by 2024.

AbbVie and Allergan argue the merger will result in “new growth platforms and leadership positions,” add immediate scale, improve profitability, increase stock value, and increase cash flow. However, the advocacy groups labeled the deal as the union of “two price-gouging patent manipulators,” maintaining that AbbVie and Allergan have a history of engaging in anticompetitive conduct (including manipulating patents and illegal discount bundling) in connection with their blockbuster drugs, and that “[w]e can look forward to new efforts to destroy competitive markets by the pharma giant that emerges from this deal.”

AbbVie more than tripled the price of Humira from 2006 to 2017, but the advocacy groups said in their letter to the FTC that “[n]either inflation nor higher manufacturing costs explain these price increases,“ add, “[g]iven AbbVie’s history of price increases, it is easy to predict what could be expected if AbbVie acquires control of Allergan’s drug portfolio.”

The advocacy groups also point to recent historical trends in the pharmaceutical industry as evidence of the likely effects of the AbbVie/Allergan merger. “Increasing consolidation in the pharmaceutical drug industry has led to higher prices for prescription drugs, less consumer choice, and less innovation. Between 1993 and 2015, there were approximately 2,500 deals, of which twenty firms were responsible for 74% of the merger and acquisition spending.  Drug prices are skyrocketing to new heights, and R&D spending has dropped. Pfizer, Inc. and Valeant Pharmaceuticals, Inc., for example, cut their R&D spending after completing acquisitions, and focused on increased sales of their expanded existing drug portfolios to increase revenues. Academic studies confirm that mergers tend to reduce innovation, as the companies in the more concentrated marketplace cut back on R&D. Indeed, the share of new drugs coming from the top twenty big pharma firms has dropped every year since 2013, from over 60% to just above 30% in 2018.”

Over the past twenty years large pharmaceutical companies have adopted (i) pay-for delay schemes that stall entry of generic drugs/biosimilars, (ii) patent thicket schemes that involve dense webs of overlapping patents that make it nearly impossible to create generic equivalents/biosimilars, and (iii) bundled discount strategies that allow these companies to leverage their market power over one drug to force healthcare providers to purchase its other drugs. AbbVie is no stranger to these tactics, as it is currently defending an antitrust class action that alleges it quashed competition for Humira by employing a patent thicket scheme and entering into illegal pay-for-delay settlements with several biosimilar manufacturers.

A pattern has emerged in the pharmaceutical industry. When a company’s blockbuster drug becomes subject to price competition due to generic or biosimilar entry, that company will seek additional market power and new cash cows through acquisitions and anticompetitive conduct rather than innovation. AbbVie will soon lose patent protection on Humira and, consequently, has adopted tactics to protect Humira and is attempting to acquire Allergan and its blockbuster Botox product.

Signatories of the letter to the FTC include Public Citizen, Families USA, U.S. PIRG Education Fund, American Federation of State, County, & Municipal Employees, UNITE HERE, Consumer Action, American Federation of Teachers, Alliance for Retired Americans, American Family Voices, Doctors for America, End AIDS Now, Prescription Justice, Social Security Works, The Other 98, Treatment Action Group and NextGen California.

Edited for MoginRubin LLP by Tom Hagy

© MoginRubin LLP

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About this Author

 Dan Mogin Mogin Rubin Managing Partner antitrust, unfair competition and complex and business litigation
Managing Partner

Dan Mogin received his B.A. (Economics) from Indiana University and his J.D. from the University of San Diego. Mr. Mogin was admitted to the State Bar of California in 1980. He is also admitted in The Supreme Court of the United States, the United States Court of Appeals for the Ninth, Seventh and Second Circuits and the United States District Courts for the Southern, Central and Northern Districts of California.

Mr. Mogin’s practice concentrates on antitrust, unfair competition and complex and business litigation. He has been selected as lead or liaison counsel in numerous cases...

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Jennifer Oliver Antitrust Attorney Morgin Rubin LLP
Partner

Ms. Oliver joined MoginRubin LLP in 2017 after nearly ten years practicing as a complex business litigator in the New York office of Weil, Gotshal & Manges LLP. Jennifer’s practice is focused on antitrust, as well as complex business and investment litigation. Her previous clients include General Electric, Lehman Brothers, Bridgestone, Washington Mutual, The Walt Disney Company, ESPN, The Dow Chemical Company, General Motors, The Port Authority of New York and New Jersey, Forbes, and American Airlines. Jennifer’s experience includes active roles in several high-profile jury trials, serving as lead counsel in complex mediations, and arguing before courts at both the trial and appellate levels. In addition to her merger and cartel work, Jennifer has also litigated trade secrets, RICO conspiracies, securities fraud, unfair trade practices, breaches of contract and privacy cases. A strong advocate for pro bono work, Jennifer was a member of the pro bono team in the seminal Supreme Court case Ashcroft v. Iqbal.

Jennifer earned her B.S. (Business Administration), M.B.A., and J.D. degrees from the University at Buffalo, each with honors, where she also served as the Vice President of the undergraduate student body and was an editor of the Buffalo Law Review and Buffalo Intellectual Property Law Journal. Jennifer is admitted to practice law in the Southern District of New York, Eastern District of New York, Northern District of California, Central District of California, and Southern District of California, and is an IAPP Certified Information Privacy Professional. She has also lived and worked in Tokyo, where she studied international law and worked as a clerk at one of Japan’s largest law firms. Jennifer was recently awarded with the 2018 International Advisory Experts Award for Complex Business Litigation in California.

Jennifer has been an active volunteer with the Junior League since 2015, where she helps spearhead initiatives to improve the lives of transition age foster youth in San Diego.

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Timothy Z. LaComb Antitrust Lawyer Mogin Rubin Law Firm
Associate

Mr. LaComb is an Associate in MoginRubin LLP’s San Diego office and his practice focuses on antitrust, unfair competition, and complex business litigation, particularly as they relate to mergers and acquisitions. Prior to joining MoginRubin LLP, Mr. LaComb was an Associate at Robbins Geller Rudman & Dowd LLP where he helped secure several multi-million-dollar recoveries for shareholders in merger-related class action litigation.  Through his extensive experience in complex litigation, he has developed an expertise and proficiency in electronic and other discovery-related issues...

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