Image Source: Pixabay

The FTC lawsuit to stop the merger of Amgen (AMGN) and Horizon Pharmaceuticals (HZNP) is unique. It is not that the FTC has never acted to stop mergers, but the logic used in this case implies a very large expansion of powers that Amgen will clearly argue is not appropriate. Typically, the FTC acts when a merger is going to create a monopoly (or close to it) in a given area as that would grant the company with too much control and power within a therapeutics area allowing them to extract what economists refer to as monopoly rents. In the case of biotech, it would simply be charging higher prices for a drug because there is not significant competition to compete on price.

Even when a proposed merger would create such a situation the FTC and companies often come to an agreement without going to court. For instance, when Bristol Myers Squibb (BMY) was attempting to buy Celgene, the FTC become concerned that Bristol Myers Squibb would have both Otezla (coming from Celgene) as well as their TYK2 asset (now approved as Sotyktu) which was in the Bristol Myers Squibb pipeline at the time of merger. The FTC refused to approve of the deal until Bristol Myers Squibb divested one of those two assets (and what now seems a little ironic, Bristol Myers Squibb sold Otezla to Amgen).

It is not surprising to see a robust dialogue with the FTC over what may or may not cause a concern and in the vast majority of cases, all parties come to an agreement that allows the proposed deals to consummate. What is odd about this case is that the key commercial assets of Horizon are completely unique to Amgen. There is no overlap. There will be no potential monopoly created outside of what already exists. There is nothing to be divested as there are no common assets going after the same indication.

Why is the FTC trying to stop the merger? It centers on a concern that Amgen could use its drugs to bundle together rebates and keep out competition from Horizon drugs. In other words, it is not that there will be a new monopoly but that the monopoly that Horizon currently has can be better protected by Amgen illegally bundling rebates. There is a court case against Amgen that was filed by Regeneron that alleged that Amgen used rebates on Otezla and Enbrel to keep Praluent off of the formularies of the PBMs but it is only an accusation. Amgen filed to have that suit dismissed but a judge refused, and it is currently in the court system.

The FTC press release makes it explicit that this is not about a new monopoly but about theoretical Amgen behavior in the future:

The proposed acquisition is the largest pharmaceutical transaction announced in 2022. Given how central protecting and growing Tepezza and Krystexxa monopoly revenues are to the deal valuation Amgen calculated for Horizon, Amgen has strong incentives post-acquisition to raise Tepezza and Krystexxa rivals’ barriers to entry or dissuade them from competing as aggressively if and when they gain FDA approval, the agency argues.

It is not about the creation of a monopoly but that Amgen could act illegally in the future and the FTC assumes that they will.

By attempting to stop the merger off of what a company has simply been accused in the assumption that they would do it in the future seems quite a reach. If Amgen loses the case against the FTC, it might never be able to purchase another company.  The potential of Amgen to illegally bundle in the future does not go away if the FTC blocks this deal. There is always the potential to do wrong and if that potential is all it takes to block an Amgen deal, then how could they ever do anything? I assume that Amgen will fight this to its fullest extent.

One could argue that if the therapeutic areas already had robust competition, then the potential of Amgen to do harm is lessened but that seems like a slippery slope. What is the line above which there is too much of an existing monopoly that Amgen is not allowed to enter? Where is that line for other companies? Can nobody buy Horizon? 

One could also make the same anti-trust case for any large pharmaceutical company. Is there a number of assets above which a company is no longer allowed to make a deal because it could illegally bundle in the future? You are starting to see why this seems like an overreach. The logic would be that any company with enough drugs could do harm in the future needs to be stopped.

What is interesting is that Pfizer has a larger portfolio of drugs that could be used to illegally bundle but its deal is not being target (yet). I think the logic would be that Amgen’s past behavior justifies this treatment but again that seems a stretch as Amgen has not been found guilty and the FTC seems to be acting as judge, jury, and executioner, which has never been in its purview. 

In fact, they are quite explicit in assuming the guilt of Amgen:

Amgen has a history of leveraging its broad portfolio of blockbuster drugs to gain advantages over potential rivals. In particular, the company has engaged in cross-market bundling, which involves conditioning rebates (or offering incremental rebates) on products such as Enbrel in exchange for giving Amgen drugs preferred placement on the insurers’ and PBMs’ lists of covered medications in different product markets.

And to be clear, Amgen has simply been accused by Regeneron and has not been found guilty. Even if they were to be found guilty, it is not the job of the FTC to assume future illegal behavior and punish it today. If Amgen were to commit crimes in the future, then a future judicial process would occur and punish appropriately. In fact, if the internal business practices of Amgen are illegal, why are they not being targeted as opposed to this merger? If there is such a clear history of abuse, then why is that not the target of legal action?

Again, not to sound like a broken record, you cannot assume actions or accusations to be true nor can you necessarily punish someone for an action they have yet to take. Even if Amgen has a history of illegal bundling, you cannot punish them for future illegal bundling that they have not done. As I noted, this precedent would imply that Amgen could never be allowed to do a deal in the future as they can never be trusted. In addition, the FTC seems to see this as a universal pharmaceutical issue and so any deal can be arbitrarily stopped because of future actions that might happen.

This is not going to be resolved anytime soon and will likely put a little chill on the sector but as it stands now it looks more like an Amgen issue than a global sector issue. This is not to say that the FTC is not upping its rigor and what it believes are its power, but this has not yet been broadly applied (and this new power assumed by the FTC has to withstand multiple court challenges). I am not a lawyer and I have no real way of handicapping any potential court cases let alone the politics of this issue, but I am highly confident that Amgen is going to spend every last resource needed to fully defend itself and close this deal.

More By This Author:

Coya Therapeutics: Another Success
Sarepta: The AdCom Documents Enter The Discussion
Another Sucess In Alzheimer’s Disease