Antitrust Law Daily Wrap Up, ANTITRUST NEWS: AAI letter to FTC raises competition concerns over merger of Teva and Allergan, (Jan 29, 2016)
Organizations Mentioned:American Antitrust Institute | Teva | Teva Pharmaceuticals
By Michael Menzhuber, J.D., LL.M.
In a January 28 letter to FTC Chairwoman Edith Ramirez, the American Antitrust Institute (AAI) outlined the competitive concerns raised by the proposed merger of generic pharmaceutical makers Teva Pharmaceuticals and Allergan.
Teva is the largest generic pharmaceutical company in the world and Allergan is currently number three in worldwide sales. If the proposed merger is consummated, the merged firm would control over 21 percent of the worldwide generic drug business. For sales within the U.S., the two companies accounted for 22 percent of all abbreviated new drug applications (ANDAs) in 2014.
The AAI letter, based on publicly available information, evaluates the likely competitive effects of the proposed merger and its implications for consumer welfare. Since generic sellers introduce a critical measure of competition into pharmaceutical markets, and play an important role in making prescription drugs available, the potential adverse effects of the merger could be significant.
Specific concerns raised in the AAI letter are that the proposed merger will: (1) eliminate competition in direct molecule and therapeutic markets because of the two companies’ considerable direct molecule and direct therapeutic overlap; and (2) limit an important source of entry under Paragraph IV (a quicker route to gain FDA approval and market entry) challenges because of its effect on maintaining conditions in which substantial generic entry can take place. The AAI is also concerned that removing the independent decision-making of one of the merged parties will likely eliminate an important source of Paragraph IV filings and diminish a significant source of competitive challenges.
According to the AAI, a common response to the presence of product overlaps between merging parties is to require product divestures. However, that remedy is insufficient to fully restore competition lost by the proposed merger because: (1) all that can really be divested is the relevant ANDA; and (2) because the ANDA has fleeting value, it is unlikely that potential buyers would pay much for the right to be a late mover into a generic market where prices decline with each additional entrant.
News: Antitrust FederalTradeCommissionNews