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        <title><![CDATA[abbvie - Doyle, Barlow & Mazard]]></title>
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                <title><![CDATA[Deeply Divided FTC Approves AbbVie’s Acquisition of Allergan]]></title>
                <link>https://www.dbmlawgroup.com/blog/deeply-divided-ftc-approves-abbvies-acquisition-of-allergan/</link>
                <guid isPermaLink="true">https://www.dbmlawgroup.com/blog/deeply-divided-ftc-approves-abbvies-acquisition-of-allergan/</guid>
                <dc:creator><![CDATA[Doyle, Barlow & Mazard PLLC]]></dc:creator>
                <pubDate>Wed, 06 May 2020 20:51:26 GMT</pubDate>
                
                    <category><![CDATA[Articles]]></category>
                
                    <category><![CDATA[FTC Antitrust Highlights]]></category>
                
                    <category><![CDATA[Healthcare]]></category>
                
                    <category><![CDATA[Merger Highlights]]></category>
                
                
                    <category><![CDATA[abbvie]]></category>
                
                    <category><![CDATA[Allergan]]></category>
                
                    <category><![CDATA[chopra]]></category>
                
                    <category><![CDATA[commissioners]]></category>
                
                    <category><![CDATA[divide]]></category>
                
                    <category><![CDATA[FTC]]></category>
                
                    <category><![CDATA[humira]]></category>
                
                    <category><![CDATA[skyrizi]]></category>
                
                
                
                <description><![CDATA[<p>On May 5, 2020, the FTC approved AbbVie&nbsp;Inc.’s (“AbbVie”)&nbsp;$63 billion acquisition of Allergan&nbsp;plc (“Allergan”)&nbsp;on the condition that the merging parties divest three minor products.&nbsp;&nbsp;The consent agreement was approved by a 3-2 party line vote. The FTC has a long history of scrutinizing transactions in the pharmaceutical industry, but Commissioners’ statements demonstrate that they&nbsp;are not on&hellip;</p>
]]></description>
                <content:encoded><![CDATA[
<p>On May 5, 2020, the FTC approved AbbVie&nbsp;Inc.’s (“AbbVie”)&nbsp;$63 billion acquisition of Allergan&nbsp;plc (“Allergan”)&nbsp;on the condition that the merging parties divest three minor products.&nbsp;&nbsp;The consent agreement was approved by a <a href="https://www.ftc.gov/news-events/press-releases/2020/05/ftc-imposes-conditions-abbvie-incs-acquisition-allergan-plc" target="_blank" rel="noopener noreferrer">3-2 party line vote</a>.</p>



<p>The FTC has a long history of scrutinizing transactions in the pharmaceutical industry, but Commissioners’ statements demonstrate that they&nbsp;are not on the same page with regards to the analytical approach of analyzing pharmaceutical mergers and how to remedy the competitive problems that are identified.</p>



<p>The three Republican Commissioners in the majority adhere to the traditional framework, which examines actual competition between existing treatments and potential competition between existing and pipeline treatments, and then tailors very narrow remedies to address those competitive overlaps.</p>



<p><strong>Background</strong></p>



<p>AbbVie and Allergan compete in the manufacture and sale of pancreatic enzyme therapies for exocrine pancreatic insufficiency (“EPI”).&nbsp; AbbVie’s Creon is a pancreatic enzyme therapy for EPI, a condition that results in the inability to digest food properly.&nbsp; Creon is the market leader.&nbsp; Meanwhile, Allergan’s Zenpep (pancrelipase) was a strong competitor in a concentrated market where the other two players have only one or two percent share.&nbsp;&nbsp;Indeed,&nbsp;AbbVie and Allergan together control 95 percent of the market for these drugs.&nbsp; As a result, the FTC concluded that the merger lessened competition in the market for treatment of EPI.</p>



<p>AbbVie and Allergan have investigative biologic drugs working their way through the U.S. Food and Drug Administration (“FDA”) approval process that are indicated to treat moderate to severe Crohn’s disease and ulcerative colitis.&nbsp;&nbsp;AbbVie’s Skyrizi, an IL-23 inhibitor, is already on the market to treat moderate-to-severe psoriasis, but Skyrizi and Allergan’s IL-23 inhibitor, brazikumab, will potentially compete in the future.&nbsp; The FTC alleges that the acquisition would eliminate future direct competition between AbbVie and Allergan in the development and sales in the United States of IL-23 inhibitor drugs for treatment of moderate-to-severe Crohn’s disease and moderate-to-severe ulcerative colitis.</p>



<p><strong>Consent Agreement</strong></p>



<p>Under the proposed consent agreement, AbbVie and Allergan are required to divest to Nestlé, S.A.&nbsp;(“Nestlé”)&nbsp;Allergan’s assets related to EPI drugs Zenpep and Viokace.&nbsp; AbbVie and Allergan also are required to transfer to AstraZeneca plc&nbsp;(“AstraZeneca”)&nbsp;Allergan’s rights and assets related to brazikumab —&nbsp;its&nbsp;IL-23 inhibitor that is in development to treat moderate-to-severe Crohn’s disease and ulcerative colitis.</p>



<p><strong>Commissioner&nbsp;<a href="https://www.ftc.gov/public-statements/2020/05/dissenting-statement-commissioner-rohit-chopra-matter-abbvie-inc-allergan" target="_blank" rel="noopener noreferrer">Chopra</a>&nbsp;and&nbsp;<a href="https://www.ftc.gov/system/files/documents/public_statements/1574577/191_0169_dissenting_statement_of_commissioner_rebecca_kelly_slaughter_in_the_matter_of_abbvie_and_0.pdf" target="_blank" rel="noopener noreferrer">Slaughter</a>‘s Dissents</strong></p>



<p>Commissioners Rohit Chopra and Rebecca Slaughter, the two Democrats, continue to call for a fundamentally different approach to analyzing pharma mergers especially when the merger combines two firms that have engaged in a laundry list of egregious anticompetitive practices that have resulted in higher prices and less consumer choice.&nbsp; Commissioner Chopra remains skeptical that the FTC’s traditional framework identifies the complete set of harms to patients and favors taking a more expansive approach to analyzing the full range of competitive consequences of pharmaceutical mergers.&nbsp; Commissioner Slaughter agrees with Chopra’s dissent but also expresses concern about the lessening of innovation that occurs from a massive pharmaceutical merger.</p>



<p>Commissioner Chopra criticizes the FTC’s myopic approach to analyzing pharmaceutical mergers as he points out that “he agency’s default strategy of requiring merging parties to divest overlapping drugs is narrow, flawed, and ineffective”.&nbsp; He added that “it misses the big picture, allowing pharmaceutical companies to further exploit their dominance, block new entrants, and harm patients in need of life-saving drugs.”</p>



<p>However, the main focus of his dissent is on the FTC’s willingness to accept “risky or questionable buyers”.&nbsp; He questions whether Nestlé, the maker of candies such as KitKat is a suitable buyer for a prescription drug and whether the divestiture of a pipeline drug to AstraZeneca would actually restore competition.</p>



<p>His main complaint about Nestlé&nbsp;is that&nbsp;the company&nbsp;is not a pharmaceutical manufacturer so it lacks the experience necessary to succeed.&nbsp; And, while the divestiture of brazikumab rids the overlap, AstraZeneca is getting the asset for nothing and Allergan will continue to pay for the development costs of the drug so AstraZeneca gets a “windfall”, has no financial stake in the development of brazikumab, and will have little to no financial incentive to market the product aggressively when and if it is ever approved.</p>



<p>Commissioner Chopra also notes&nbsp;that the FTC failed to account for the hurdles that AstraZeneca will face if brazikumab is ever approved.&nbsp;&nbsp;AstraZeneca&nbsp;would have to contend with AbbVie’s rebate wall.&nbsp;&nbsp;Chopra specifically states:&nbsp;“the Commission could have also taken steps to reduce a key barrier to entry and expansion for AstraZeneca by restricting AbbVie and Allergan’s contracting and rebating practices.&nbsp; This would make it more likely that AstraZeneca would exercise its option to develop and bring brazikumab to market.&nbsp; Importantly, in the immunology space, a key feature of competition is the ability for a market player to engage in&nbsp;‘portfolio contracting’&nbsp;and&nbsp;‘bundled rebates’&nbsp;across its portfolio of drugs.&nbsp; The evidence in the investigation suggests that AbbVie currently uses its bargaining leverage from its blockbuster drug Humira to preference its other immunology drugs.&nbsp; AbbVie’s rebating practices are suspicious in their own right, and certain aspects of these practices might be unlawful.”</p>



<p><a href="https://www.ftc.gov/system/files/documents/public_statements/1574619/abbvie-allergan_majority_statement_5-5-20.pdf"><strong>Majority Statement</strong></a></p>



<p>On the flip side, the majority took on Commissioner Chopra’s dissent with a very aggressive tone.&nbsp; The majority said Chopra’s dissent “makes misleading claims about the staff’s investigation, the state of competition in the pharmaceutical industry, and the commission’s enforcement record in this industry,” and that it “relies on false assertions, misapplication of law, and specious logic.&nbsp; It appears to have fully embraced the adage to “never let the truth get in the way of a good story”.&nbsp; The majority points out that while Nestlé is the world’s largest food and beverage company, it has “tremendous financial resources”, a substantial U.S. sales infrastructure, and “contrary to Commissioner Chopra’s assertions — Nestlé is no stranger to the healthcare space.”&nbsp;&nbsp;Additionally, the majority took on the part of Commissioner Chopra’s dissent, which raised concerns regarding the potential that the merged firm&nbsp;could use rebating practices to disadvantage AstraZeneca in bringing brazikumab to the market.&nbsp; To that end, the majority stated that “in the context of a merger investigation, the role of a divestiture is to restore competition to the state that it would have been absent the merger, not to provide the divestiture buyer with advantages that Allergan would not have had.” Basically, the majority is saying that behavioral remedies are inappropriate because Allergan would have had similar hurdles to overcome.</p>



<p>Truth be told, the FTC has an enormous amount of flexibility in crafting remedies to ensure that competition is fully restored.&nbsp; Here the majority takes a very narrow approach of simply transferring pipeline assets to a divestiture buyer without regard to whether the product will ever be marketed.&nbsp; The decision is curious given that former Director of Bureau of Competition Bruce Hoffman publicly stated in a speech in 2018 that pipeline drug divestitures face a “startlingly high” rate of failure and as Chopra points out in his dissent, the FTC has a history of using behavioral conditions to support divestiture buyers.</p>



<p>That said, the majority believes that the consent fully resolves competitive harm from the merger because the divestitures handle the overlaps, both firms are strong in different areas, and there is no evidence the deal will result in higher prices and lost innovation.</p>



<p><strong>Concluding Thoughts</strong></p>



<p>The philosophical divide between the Republican and Democrat Commissioners is not a surprise given some of their past votes on merger approvals.&nbsp; The fundamental conflict goes to the very heart of how the FTC should evaluate pharmaceutical mergers.&nbsp; The majority – as well as the FTC staff – continues to use the standard traditional analytical framework.&nbsp; They are making an evidentiary-based analysis as to whether the specific merger before them is likely to substantially lessen competition in a line of business.&nbsp; The majority is concluding that the transaction should be allowed with narrowly tailored divestiture remedies that resolve the specific competitive concerns and shies away from using a broader and more comprehensive approach.</p>



<p>The Democratic Commissioners, on the other hand, believe that the FTC’s analytical approach is myopic and fails to address wide-ranging issues of competitive harm.&nbsp; They believe that the healthcare markets are not competitive and that the FTC’s approach has led to increased consolidation and higher prescription drug prices so a change in approach may be necessary.&nbsp; And to the extent that the FTC is going to accept divestiture remedies of specific products, the Democratic Commissioners believe the FTC should require divestiture buyers that will fully restore competition.</p>



<p>Here, Commissioner Chopra raises serious issues about both buyers.&nbsp; There is certainly always a concern when the divestiture buyer does not replace the competitive intensity that is lost from the merger, and here, Nestlé’ is no Allergan.&nbsp; The evidence also very clearly suggests that AstraZeneca is not financially committed to the pipeline drug that it is acquiring for “no money” and that certain conduct in the industry may prevent AstraZeneca from effectively marketing brazikumab.&nbsp; Specifically, Commissioner Chopra shines a light on how AbbVie’s rebating and bundling practices may actually be monopolistic conduct that is anticompetitive, and he rightly questions whether the conduct should have been prohibited in the consent order.&nbsp; While the Commissioners disagree on a lot, they certainly all should be in agreement that consumers should not have to bear the risk of a failed remedy.</p>



<p><strong>Andre Barlow</strong><br>(202) 589-1838<br><a href="mailto:abarlow@dbmlawgroup.com"><strong>abarlow@dbmlawgroup.com</strong></a></p>
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            <item>
                <title><![CDATA[Consumer Groups Raise Rebate Wall Concerns With Regards to AbbVie/Allergan Merger]]></title>
                <link>https://www.dbmlawgroup.com/blog/consumer-groups-raise-rebate-wall-concerns-with-regards-to-abbvie-allergan-merger/</link>
                <guid isPermaLink="true">https://www.dbmlawgroup.com/blog/consumer-groups-raise-rebate-wall-concerns-with-regards-to-abbvie-allergan-merger/</guid>
                <dc:creator><![CDATA[Doyle, Barlow & Mazard PLLC]]></dc:creator>
                <pubDate>Wed, 19 Feb 2020 21:03:33 GMT</pubDate>
                
                    <category><![CDATA[FTC Antitrust Highlights]]></category>
                
                    <category><![CDATA[Healthcare]]></category>
                
                    <category><![CDATA[Merger Highlights]]></category>
                
                
                    <category><![CDATA[abbvie]]></category>
                
                    <category><![CDATA[Allergan]]></category>
                
                    <category><![CDATA[antitrust]]></category>
                
                    <category><![CDATA[astrazeneca]]></category>
                
                    <category><![CDATA[Booker]]></category>
                
                    <category><![CDATA[drug costs]]></category>
                
                    <category><![CDATA[FTC]]></category>
                
                    <category><![CDATA[Harris]]></category>
                
                    <category><![CDATA[inflectra]]></category>
                
                    <category><![CDATA[J&J]]></category>
                
                    <category><![CDATA[klobuchar]]></category>
                
                    <category><![CDATA[prescription]]></category>
                
                    <category><![CDATA[rebate]]></category>
                
                    <category><![CDATA[rebate trap]]></category>
                
                    <category><![CDATA[rebate wall]]></category>
                
                    <category><![CDATA[remicade]]></category>
                
                    <category><![CDATA[Sanders]]></category>
                
                    <category><![CDATA[Warren]]></category>
                
                
                
                <description><![CDATA[<p>On February 18, 2020, a group of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) raising concerns that the divestiture of Allergan plc’s (“Allergan”) pipeline drug, brazikumab, will not succeed unless the FTC addresses AbbVie’s use of rebate walls. Consumer Group Concerns Regarding Rebate Walls and&hellip;</p>
]]></description>
                <content:encoded><![CDATA[
<p>On February 18, 2020, a group of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) raising concerns that the divestiture of Allergan plc’s (“Allergan”) pipeline drug, brazikumab, will not succeed unless the FTC addresses AbbVie’s use of rebate walls.</p>



<p><strong>Consumer Group Concerns Regarding Rebate Walls and the Proposed Divestiture</strong></p>



<p>The letter expresses concerns that the proposed divestiture to AstraZeneca of Allergan’s brazikumab, a drug in development, is inadequate to address the clear anticompetitive effects of the AbbVie/Allergan merger.&nbsp;&nbsp;The letter makes the following points:</p>



<p>First, the divestiture of Allergan’s IL-23 inhibitor, brazikumab, a drug in the pipeline, to AstraZeneca is unlikely to fully restore competition.&nbsp; The divestiture is being proposed to resolve the horizontal overlap between AbbVie’s IL-23 inhibitor, Skyrizi, and Allergan’s brazikumab for potential biologic treatments for Crohns diseas and ulcer colitis.&nbsp; The group argues that the divestiture raises a number of serious concerns because it goes against the Commission’s policy of requiring divestitures of on market drugs instead of pipeline drugs.&nbsp; Indeed, the FTC has required divestitures of on market drugs in <a href="https://www.ftc.gov/news-events/press-releases/2019/11/ftc-requires-bristol-myers-squibb-company-celgene-corporation" target="_blank" rel="noopener noreferrer">Bristol Meyers/Celgene</a> and <a href="https://www.ftc.gov/system/files/documents/cases/1810017_amneal_impax_analysis_4-27-18.pdf" target="_blank" rel="noopener noreferrer">Amneal/Impax</a> because the Commission generally believes that consumers should not bear the risk that a divestiture may fail.</p>



<p>Second, the consumer groups contend that AstraZeneca is a questionable buyer for brazikumab.&nbsp;&nbsp;AstraZeneca is not committed to the assets because <a href="https://www.astrazeneca.com/media-centre/press-releases/2016/medimmune-out-licenses-potential-medicine-for-inflammatory-diseases-to-allergan-03102016.html#" target="_blank" rel="noopener noreferrer">it gave up on them</a> just three years ago and according to the parties’ <a href="https://www.astrazeneca.com/media-centre/press-releases/2020/astrazeneca-to-recover-the-global-rights-to-brazikumab-medi2070-from-allergan-27012020.html" target="_blank" rel="noopener noreferrer">press releases</a> announcing the deal, won’t be investing in the development costs to obtain FDA approval.&nbsp; In fact, Allergan is expected to pay for the development costs.&nbsp; Without having a significant financial stake in the development of brazikumab, it becomes less likely that AstraZeneca will ever launch the products and compete with AbbVie’s Skyrizi in the markets for Crohn’s disease and ulcerative colitis.</p>



<p>Third, for any divestiture to be effective, it is crucial to impose restrictions on AbbVie’s use of rebate walls (contracts that foreclose rival drugs from getting on drug formularies) that could inhibit any buyer of the pipeline assets from being an effective competitor in the future.&nbsp; AbbVie’s use of rebate walls creates substantial barriers to AstraZeneca’s commercial success in bringing brazikumab to the market and the success of competing products in these therapeutic categories. AbbVie has and is currently engaged in restrictive contracting practices that have enabled the creation of so called “rebate walls” to protect its blockbuster drugs, Humira and Skyrizi, that not only lead to higher prescription drug prices, but foreclose rival drugs from obtaining access to payors’ formularies, resulting in reduced consumer choice.</p>



<p><strong>Rebate Walls Raise Serious Antitrust Concerns</strong></p>



<p>Pharmaceutical manufacturers have implemented a new strategy to block and delay entry of biosimilars and other drugs from the market through a contracting practice that creates what is known as a “rebate wall” or “rebate trap”. &nbsp;&nbsp;A rebate wall occurs when a manufacturer leverages its market-dominant position to secure preferred formulary access for its products by offering lucrative incentives to pharmacy benefit managers (“PBMs”) and health insurers in the form of volume-based rebates. &nbsp;These rebates are often offered across multiple products, indications, and therapeutic specialties, the breadth of which cannot be matched by new and innovative therapies. &nbsp;The Trump Administration earlier this year sought to eliminate rebates from the Medicare prescription drug program because pharmaceutical rebates raise more profound competitive problems than discounts in other industries.&nbsp; In fact, the coalition notes that there is increasing evidence that rebates actually inflate prices (as opposed to decreasing them) and that these rebates, unlike typical discounts, do not ultimately benefit consumers.</p>



<p><strong>FTC is Currently Investigating Rebate Walls</strong></p>



<p>On July 29, 2019, Johnson & Johnson (“J&J”) disclosed that the&nbsp;<a href="https://www.fiercepharma.com/pharma/j-j-has-boasted-about-its-remicade-defense-and-now-it-s-under-ftc-investigation"><strong>FTC issued a civil investigative demand</strong></a>&nbsp;regarding its investigation of whether J&J’s contracting practices related to its rebates for Remicade (infliximab) amount to exclusionary conduct illegal under the antitrust laws.</p>



<p>In 2017, Pfizer Inc. (“Pfizer”) filed a lawsuit against J&J for its contracting practices that protect Remicade’s position in the market and deny patients access to Pfizer’s infliximab biosimilar, Inflectra.&nbsp; The lawsuit is still in the discovery phase.</p>



<p>Biosimilar developers have been urging the FTC to weigh in on whether exclusionary contracts for brands based on aggressive rebating strategies are legal and the agency has chosen a high-profile example to investigate.</p>



<p>Pfizer applauded the FTC’s investigation in a statement: “We believe the [FTC’s] decision to open an investigation into the competitiveness of the biosimilar is an important step, which we hope will lead to a robust, competitive marketplace for patients and physicians to access biosimilar medicines.”</p>



<p><strong>Rebate Wall Concerns Were Raised By Nine Senators in the FTC’s Investigation of Bristol-Myers/Celgene and AbbVie/Allergan</strong></p>



<p>On September 19, 2019, nine senators (Klobuchar, Booker, Baldwin, Smith, Hirono, Sanders, Harris, and Warren) wrote a <a href="https://www.klobuchar.senate.gov/public/index.cfm/2019/9/klobuchar-leads-letter-warning-that-pharmaceutical-mergers-may-threaten-drug-competition-increase-prices-and-reduce-patient-access-to-essential-medications" target="_blank" rel="noopener noreferrer">letter</a> to the FTC expressing their concerns that “[p]ost-merger, the combined firm would have greater ability to condition buyers’ access to these multi-billion dollar drugs on purchases of less popular drugs in their portfolios. They could also use their increased leverage to secure favorable positions on buyers’ drug formularies by offering volume-based rebates that competitors with rival products cannot match; these “rebate traps” or “rebate walls” can have the effect of preventing alternative drugs, including more affordable biosimilars and generics, from competing.”</p>



<p><strong>Thoughts</strong></p>



<p>The AbbVie/Allergan merger gives the FTC an opportunity to investigate the questionable contracting practice in the pharmaceutical drug industry known as a “rebate trap”.&nbsp; Payors such as PBMs and health insurers obtain rebates on prescription drugs from pharmaceutical manufacturers that have actually inflated the price of drugs and stifled the ability of rival drug manufacturers to effectively compete. &nbsp;This practice is recognized by both the administration and industry players as anticompetitive.&nbsp; Moreover, major drug manufacturers such as Pfizer, Shire, and Sanofi have filed antitrust suits challenging rebate walls as antitrust violations.&nbsp; In theory, rebates could have a positive impact on the prescription drug market if they led to lower prices and benefitted consumers. &nbsp;But, in practice, this is simply not the case. Rebate walls distort the workings of the free market, result in higher drug prices, and reduce patients’ access to affordable branded drugs.</p>



<p>While rebates and discounts can be procompetitive if they lead to lower prices for consumers, some drug manufacturers are structuring discounts to limit competition from rivals in an effort to protect their monopolies.&nbsp; When a rebate wall is successfully erected by a market-dominant manufacturer, a payor faces strong financial disincentives to grant access to new and innovative therapies, as doing so would result in the loss of hundreds of millions in guaranteed rebate dollars for the payor. &nbsp;This condition creates a “trap” for payers who would otherwise be inclined to grant formulary access to therapies that are newer and more innovative, yet lack established volume and subsequent potential for rebate revenue. &nbsp;In many cases, these actions prevent patients and physicians from seriously considering new medications at competitive prices.</p>



<p>Given the competitive risks that rebate walls pose, the coalition has asked the FTC to investigate how the rebate wall may undermine the proposed divestiture.&nbsp; Competition works when new rival drugs&nbsp; are allowed open and fair access to the market and consumers have access to cost saving treatments.&nbsp; And while the FTC has not publicly acknowledged examining rebate walls, the issue is now in front of the staff.</p>
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                <title><![CDATA[Coalition of Unions and Consumer Groups Oppose AbbVie/Allergan Merger Based on Use of Rebate Walls]]></title>
                <link>https://www.dbmlawgroup.com/blog/coalition-of-unions-and-consumer-groups-oppose-abbvie-allergan-merger-based-on-use-of-rebate-walls/</link>
                <guid isPermaLink="true">https://www.dbmlawgroup.com/blog/coalition-of-unions-and-consumer-groups-oppose-abbvie-allergan-merger-based-on-use-of-rebate-walls/</guid>
                <dc:creator><![CDATA[Doyle, Barlow & Mazard PLLC]]></dc:creator>
                <pubDate>Thu, 12 Sep 2019 21:44:41 GMT</pubDate>
                
                    <category><![CDATA[Antitrust Litigation Highlights]]></category>
                
                    <category><![CDATA[FTC Antitrust Highlights]]></category>
                
                    <category><![CDATA[Healthcare]]></category>
                
                    <category><![CDATA[Merger Highlights]]></category>
                
                
                    <category><![CDATA[abbvie]]></category>
                
                    <category><![CDATA[Allergan]]></category>
                
                    <category><![CDATA[antitrust]]></category>
                
                    <category><![CDATA[bristol myers squibb]]></category>
                
                    <category><![CDATA[celegene]]></category>
                
                    <category><![CDATA[consumer action]]></category>
                
                    <category><![CDATA[FTC]]></category>
                
                    <category><![CDATA[J&J]]></category>
                
                    <category><![CDATA[merger]]></category>
                
                    <category><![CDATA[pfizer]]></category>
                
                    <category><![CDATA[public citizen]]></category>
                
                    <category><![CDATA[rebate]]></category>
                
                    <category><![CDATA[rebate trap]]></category>
                
                    <category><![CDATA[rebate wall]]></category>
                
                
                
                <description><![CDATA[<p>On September 12, 2019, a coalition of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) opposing AbbVie Inc.’s (“AbbVie”) acquisition of Allergan plc (“Allergan”). Coalition Opposing the Merger The coalition includes Families USA, Public Citizen, U.S. PIRG Education Fund, Service Employees International Union, American Federation of&hellip;</p>
]]></description>
                <content:encoded><![CDATA[
<p>On September 12, 2019, a coalition of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) opposing AbbVie Inc.’s (“AbbVie”) acquisition of Allergan plc (“Allergan”).</p>



<p><strong>Coalition Opposing the Merger</strong></p>



<p>The coalition includes Families USA, Public Citizen, U.S. PIRG Education Fund, Service Employees International Union, American Federation of State, County, and 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.&nbsp; It is asking the FTC to conduct a thorough investigation and to block the merger if the facts support it and a remedy cannot be devised to restore competition. &nbsp;The coalition highlights the competitive problems arising from continued consolidation in the pharmaceutical industry and requests that the FTC include in its investigation ongoing anticompetitive conduct by the parties, such as the use of rebate walls, which will have an even more profound anticompetitive effect if this merger is consolidated, as well as past abuse of the patent system.</p>



<p>The letter makes three points.</p>



<p>First, the merger of AbbVie and Allergan will continue a tremendous trend of consolidation and the evidence shows that consumers are paying higher prices and losing out on access and choice because of less innovation by big pharma companies. &nbsp;Mergers result in fewer choices for consumers, and drug companies are increasingly spending their money on acquisitions instead of research and development.</p>



<p>Second, the merger will reduce competition in a number of markets where the companies directly overlap with each other.&nbsp; The coalition underlines an overlap between AbbVie’s blockbuster, Humira, which already treats 10 indications including Crohn’s disease and ulcerative colitis, and its new IL-23 blockbuster, Skyrizi, which is currently marketed to treat moderate to severe psoriasis but is being investigated to treat Chron’s disease and ulcerative colitis, with Allergan’s brazikumab, an IL-23 inhibitor that is currently being investigated to treat Crohn’s disease and ulcerative colitis.&nbsp; The coalition further points out that the FTC’s policy is to accept divestitures of actually manufactured pharmaceutical products over pipeline <a href="https://www.antitrustlawyerblog.com/ftc-says-no-more-divestitures-of-complex-pipeline-products-to-resolve-future-competition-concerns-in-pharmaceutical-mergers/">products</a>.</p>



<p>Third, the merger will exacerbate competitive problems that already exist in the pharmaceutical drug industry relating to rebate walls and patent abuses. &nbsp;The coalition requests that the FTC not limit its investigation to direct product overlaps because the combination of AbbVie’s and Allergan’s blockbuster drugs will enable AbbVie to engage in a whole range of potentially anticompetitive conduct to hamper the ability of rivals to compete.&nbsp;&nbsp;Indeed, both manufacturers have previously engaged in anticompetitive behavior to prolong their monopolies, suppress competition and raise prices.&nbsp;&nbsp;The coalition points out, for example, that the merger would enable AbbVie to increase its bargaining leverage over payors to use exclusionary practices such as rebate walls to limit the ability of rivals to expand and enter. &nbsp;It underscores that both AbbVie and Allergan have used rebate walls to stifle competition in the past.</p>



<p><strong>Families USA,</strong>&nbsp;one of the groups that signed onto the letter, said, “The proposed acquisition of Allergen by AbbVie will combine two companies that independently engage in anticompetitive practices that make prescription drugs unaffordable for families into one mega corporation. &nbsp;We urge the FTC to carefully consider the impact of this proposed drug company merger on competition and prices and protect access to critical medicines for consumers.” &nbsp;<strong>And Peter Maybarduk, Access to Medicines Director for Public Citizen</strong>, said, “Two leading price gouging patent manipulators unite.&nbsp; AbbVie is notorious for manipulating its patent power over the blockbuster medication Humira and AIDS drugs like ritonavir, keeping affordable generics off the market and even slowing innovation.&nbsp; Allergan is notorious for hiding its patents behind the sovereign immunity of a Mohawk tribe. &nbsp;Unless the FTC steps in, we can look forward to new efforts to destroy competitive markets by the pharma giant that emerges from this deal, in an industry increasingly focused on monopolizing yesterday’s inventions instead of creating new ones.”</p>



<p><strong>Rebate Walls</strong></p>



<p>Pharmaceutical manufacturers have implemented a new strategy to block and delay entry of biosimilars and other drugs from the market through a contracting practice that creates what is known as a “rebate wall” or “rebate trap”. &nbsp;&nbsp;A rebate wall occurs when a manufacturer leverages its market-dominant position to secure preferred formulary access for its products by offering lucrative incentives to pharmacy benefit managers (“PBMs”) and health insurers in the form of volume-based rebates. &nbsp;These rebates are often offered across multiple products, indications, and therapeutic specialties, the breadth of which cannot be matched by new and innovative therapies. &nbsp;The Trump Administration earlier this year sought to eliminate rebates from the Medicare prescription drug program because pharmaceutical rebates raise more profound competitive problems than discounts in other industries.&nbsp; In fact, the coalition notes that there is increasing evidence that rebates actually inflate prices (as opposed to decreasing them) and that these rebates, unlike typical discounts, do not ultimately benefit consumers.</p>



<p><strong>FTC is Currently Investigating Rebate Walls</strong></p>



<p>On July 29, 2019, Johnson & Johnson (“J&J”) disclosed that the <a href="https://www.fiercepharma.com/pharma/j-j-has-boasted-about-its-remicade-defense-and-now-it-s-under-ftc-investigation" target="_blank" rel="noopener noreferrer">FTC issued a civil investigative demand</a> regarding its investigation of whether J&J’s contracting practices related to its rebates for Remicade (infliximab) amount to exclusionary conduct illegal under the antitrust laws.</p>



<p>In 2017, Pfizer Inc. (“Pfizer”) filed a lawsuit against J&J for its contracting practices that protect Remicade’s position in the market and deny patients access to Pfizer’s infliximab biosimilar, Inflectra.&nbsp; The lawsuit is still in the discovery phase.</p>



<p>Biosimilar developers have been urging the FTC to weigh in on whether exclusionary contracts for brands based on aggressive rebating strategies are legal and the agency has chosen a high-profile example to investigate.</p>



<p>Pfizer applauded the FTC’s investigation in a statement: “We believe the [FTC’s] decision to open an investigation into the competitiveness of the biosimilar is an important step, which we hope will lead to a robust, competitive marketplace for patients and physicians to access biosimilar medicines.”</p>



<p><strong>Rebate Wall Concerns Were Raised in the FTC’s Investigation of Bristol-Myers/Celgene</strong></p>



<p>On January 11, 2019, Rep. Peter Welch (D-VT) and Rep. Francis Rooney (R-FL) wrote a<a href="https://www.antitrustlawyerblog.com/members-of-congress-want-an-antitrust-investigation-into-bristol-myers-squibbs-acquisition-of-celgene/"> letter to the FTC</a>, urging the agency to investigate Bristol-Myers Squibb Company’s (“Bristol-Myers”) acquisition of Celgene Corporation (“Celgene”).&nbsp; The <a href="https://welch.house.gov/sites/welch.house.gov/files/Letter%20to%20FTC%20and%20DOJ%20on%20BMS%20Celgene%20Merger.pdf" target="_blank" rel="noopener noreferrer">letter</a> asked the FTC to examine how the acquisition allows Bristol-Myers to increase its drug portfolio and leverage over PBMs when negotiating preferred drug placement on formularies.&nbsp; The letter argued that the larger the firm, the more it can use rebate walls to block more affordable and, in some cases, more efficacious products’ access to formularies.</p>



<p><strong>Thoughts</strong></p>



<p>The AbbVie/Allergan merger gives the FTC an opportunity to investigate the questionable contracting practice in the pharmaceutical drug industry known as a “rebate wall”.&nbsp; Payors such as PBMs and health insurers obtain rebates on prescription drugs from pharmaceutical manufacturers that have actually inflated the price of drugs and stifled the ability of rival drug manufacturers to effectively compete. &nbsp;This practice is recognized by both the administration and industry players as anticompetitive.&nbsp; Department of Health and Human Services Secretary Alex Azar has noted that rebate walls can prevent competition and new entrants into the system.&nbsp; Moreover, major drug manufacturers such as Pfizer, Shire, and Sanofi have filed antitrust suits challenging rebate walls as antitrust violations.&nbsp; In theory, rebates could have a positive impact on the prescription drug market if they led to lower prices and benefitted consumers. &nbsp;But, in practice, this is simply not the case. &nbsp;Rebate walls distort the workings of the free market, result in higher drug prices, and reduce patients’ access to affordable branded drugs.</p>



<p>While rebates and discounts can be procompetitive if they lead to lower prices for consumers, some drug manufacturers are structuring discounts to limit competition from rivals in an effort to protect their monopolies.&nbsp; The FTC understands that when a rebate wall is successfully erected by a market-dominant manufacturer, a payor faces strong financial disincentives to grant access to new and innovative therapies, as doing so would result in the loss of hundreds of millions in guaranteed rebate dollars for the payor. &nbsp;This condition creates a “trap” for payers who would otherwise be inclined to grant formulary access to therapies that are newer and more innovative, yet lack established volume and subsequent potential for rebate revenue. &nbsp;In many cases,&nbsp;these actions&nbsp;prevent patients and physicians from seriously considering new medications at competitive prices.</p>



<p>Given the competitive risks that rebate walls pose, the coalition has asked the FTC to investigate how this transaction may make the situation related to this suspect contracting practice worse.&nbsp; Competition works when new rival drugs (biosimilars, branded drugs or generics) are allowed open and fair access to the market and consumers have access to cost saving treatments.&nbsp; And while the FTC has not publicly acknowledged examining mergers between drug manufacturers under this type of theory before, the issue is now in front of the staff.</p>
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                <title><![CDATA[The STRONGER Patents Act is Bad for Patients]]></title>
                <link>https://www.dbmlawgroup.com/blog/the-stronger-patents-act-is-bad-for-patients/</link>
                <guid isPermaLink="true">https://www.dbmlawgroup.com/blog/the-stronger-patents-act-is-bad-for-patients/</guid>
                <dc:creator><![CDATA[Doyle, Barlow & Mazard PLLC]]></dc:creator>
                <pubDate>Tue, 10 Sep 2019 15:49:59 GMT</pubDate>
                
                    <category><![CDATA[Healthcare]]></category>
                
                
                    <category><![CDATA[abbvie]]></category>
                
                    <category><![CDATA[big pharma]]></category>
                
                    <category><![CDATA[patent abuse]]></category>
                
                    <category><![CDATA[stronger patents act]]></category>
                
                
                
                <description><![CDATA[<p>The STRONGER Patents Act is proposed legislation that if passed would ultimately lead to higher drug prices for patients while lining the pockets of the big pharmaceutical companies. American patients are well-acquainted with the high prices Big Pharma charges for prescription drugs. Families across the country are struggling to afford life-saving and maintaining medication they&hellip;</p>
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<p>The STRONGER Patents Act is proposed legislation that if passed would ultimately lead to higher drug prices for patients while lining the pockets of the big pharmaceutical companies.</p>



<p>American patients are well-acquainted with the high prices Big Pharma charges for prescription drugs. Families across the country are struggling to afford life-saving and maintaining medication they desperately need while the big pharmaceutical companies reap the rewards. &nbsp;In fact, prescription drug prices here in the United States are so high that Americans <a href="https://www.commonwealthfund.org/publications/issue-briefs/2017/oct/paying-prescription-drugs-around-world-why-us-outlier" target="_blank" rel="noopener noreferrer">pay significantly more than any other high-income nation</a> for the exact same drugs.</p>



<p>A significant reason that drug prices are so high is that Big Pharma has established effective monopolies by preventing and delaying generic drug competition. Big Pharma has many techniques they use to prevent and delay competition and keep drug prices high, but their most pervasive and damaging tool is the abuse of America’s patent system.</p>



<p>Patents grant a monopoly for a limited amount of time, after which competition is allowed. This balances a strong incentive to innovate against the public interest in competition that makes new technology more accessible and affordable. Unfortunately, Big Pharma uses techniques called <a href="https://www.capanow.org/health-care/abbvies-humira/"><em>patent thickening</em></a> and <a href="https://www.capanow.org/case-studies/product-hopping/"><em>product hopping</em></a> to game the patent system, effectively ensuring that their drug monopolies extend in perpetuity and affordable alternatives never enter the market.&nbsp; These monopolies have allowed Big Pharma to consistently raise prices to exorbitant levels all at the expense of patients.</p>



<p>Abuse of the patent system can be costly for Americans, especially vulnerable patient populations who must take certain medications. For example, AbbVie filed over 240 patent applications for a single drug, Humira, and received over 110 granted patents. This patent thicket allowed AbbVie to keep biosimilars out of the market until 2023, when other countries have had access to more affordable competing versions since 2018. Cutting through these thickets will allow generic drug competition sooner, saving patients and the healthcare system billions of dollars. &nbsp;By making it harder to cut through Big Pharma’s patent thickets, the STRONGER Patents Act will keep prescription drug prices high at a time when Congress desperately needs to take actions to cut drug prices for American patients and taxpayers.</p>



<p>The STRONGER Patents Act of 2019 would make matters worse for consumers.&nbsp; The STRONGER Patents Act would strongly limit the ability of the Patent Office to review and screen for bad and invalid patents. Under current law, the public can appeal to the patent office to review bad patents, which is an incredibly important tool as Big Pharma routinely attempts to expand their monopolies through bombarding the patent office with excessive applications.&nbsp; Today, interested parties can appeal to the Patent Office to review bad patents through inter partes review (IPR), which allows interested parties facing infringement allegations to challenge bad patents in front of administrative judges with technical expertise. This process is much cheaper and faster than trials in federal court.</p>



<p>The STRONGER Patents Act would undermine this process by setting much higher standards for invalidating patents and raising the cost of invalidating them. The legislation also ends public participation in this important process.&nbsp; At a time when patent abuse is a serious and growing problem, this is the wrong approach. Consumers will literally pay the price.&nbsp; Prescription drugs will be more expensive, innovation will be reduced, and there will be less competition.</p>



<p>At a time when too many Americans’ are struggling with rising drug costs, Congress should not be concerned about Big Pharma’s need to strengthen the patent laws rather Congress should be focused on legislation that reins in Big Pharma, ends their rampant patent abuse and leads to lower prices for life saving and maintaining prescription drugs and treatments.</p>



<p><strong>Andre Barlow</strong><br>(202) 589-1838<br><a href="mailto:abarlow@dbmlawgroup.com"><strong>abarlow@dbmlawgroup.com</strong></a></p>
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