Comments on AbbVie-Allergan FTC Consent Agreement
Public Citizen Urges FTC to Protect Consumers from Anticompetitive Merger
Re: AbbVie and Allergan; File No. 191 0169
Dear Secretary,
Public Citizen is a consumer advocacy organization with over 500,000 members and supporters. Public Citizen’s Access to Medicines Program works with partners across the United States and around the world to make medicines affordable and available for all through tools in policy and law. We are writing today to express serious concerns with the narrow and likely ineffective conditions of the proposed Consent Agreement that allows AbbVie Inc. (“AbbVie”) to acquire Allergan plc (“Allergan”). Together, these companies may form the fourth largest biopharmaceutical company in the world.[1]
In January, Public Citizen published By Any Means Necessary, a report on Allergan’s anticompetitive conduct (see below).[2] In April, Public Citizen called for a pause on any corporate mergers during the COVID-19 pandemic.[3]
The Federal Trade Commission (FTC) has abdicated its responsibility to protect consumers with its narrow and rushed investigation. Even if the FTC ultimately chose not to block the AbbVie-Allergan acquisition, it should have demanded stronger safeguards to protect the public from this anticompetitive merger. As it stands, the Consent Agreement is inadequate. It only requires divesture of Zenpep and Viokase to Nestlé S.A. and the return of brazikumab assets to AstraZeneca. As Commissioner Rohit Chopra explained in his dissenting statement, requiring merging parties to divest products in overlapping markets is “the agency’s default strategy” and is “narrow, flawed, and ineffective.”[4]
Instead, the FTC should more fully consider the range of harms to consumers, and require stronger conditions to prevent anticompetitive conduct, particularly given the companies’ records of anticompetitive behavior. A larger corporation is likely only to increase the harmful effects of these tactics.
AbbVie and Allergan both have a history of anticompetitive conduct.
AbbVie is notorious for abusing the patent system. In 2018, AbbVie had applied for 247 patent applications on Humira (adalimumab), its best-selling drug.[5] Nearly 90 percent of the patent applications were filed after the drug was first approved.[6] In addition to building patent thickets, AbbVie has abused its monopoly power by consistently raising the price of existing drugs. Between 2016 to 2018, AbbVie increased the list price of Humira by 19.1%, and its net price, after rebates, by 16 percent.[7] This increased drug spending by $1.86 billion.[8] The Institute for Clinical and Economic Review concluded that Humira’s price increases were “unsupported by new clinical evidence.”[9]
Allergan has a similar history. Allergan and its subsidiaries have engaged in pay-for-delay deals and “product hops,” making superficial tweaks to old products to undermine generic competition. (In a particularly egregious case, patients cut into a capsule for a “new” product and found the original tablet inside.[10]) Allergan recently tried to avoid review for its patents by transferring them to a Native American tribe in an attempt to benefit from sovereign immunity. In addition, despite pledging to limit price increases on existing drugs, Allergan was “setting the pace with increases” in 2019, according to the Wall Street Journal.[11] That year, Allergan increased the price of 51 products—27 by around 9% and 24 by around 4.9%.
With an increased portfolio of drugs, a larger corporation will now have more ability to engage in the anticompetitive conduct detailed above.
At a minimum, the FTC should require stronger conditions to prevent further anticompetitive conduct.
Last year, Public Citizen and other groups collectively representing ten million people called for the FTC to investigate and “take all necessary action, including blocking the merger, to prevent further harm to consumers.”[12] In January, Public Citizen released a report detailing Allergan’s abuses and urged the FTC to “at a minimum order the companies to finally stop the anticompetitive practices . . .and impose conditions intended to prevent such anticompetitive conduct from ever occurring again.”[13] Thus far, the FTC has largely failed to take these steps.
At a minimum, the FTC should explicitly condition the merger on a binding commitment to stop anticompetitive practices, like pay-for-delay deals, product hopping, citizen petition abuse, price hikes, patent monopoly abuse, and illegal marketing and influence. If anticompetitive conduct does occur, the FTC should enforce non-compliance with meaningful penalties. For example, compulsory licensing could remedy patent-related abuses. Third, to ensure that the company is held accountable, the FTC should impose regular reporting requirements. Finally, the FTC should require divesture of products in overlapping markets, including candidates in early-stage clinical trials. Of the four conditions, the FTC has only contemplated the latter in the proposed Consent Agreement.
But this fails to meet the scale of what is required. The FTC has taken over a dozen actions related to Allergan and its subsidiaries alone in recent years.[14] Letting two price-gouging patent manipulators unite is a mistake. With the proposed Consent Agreement, the FTC fails to prevent further harm to consumers. A stronger approach is urgently needed.
Sincerely,
Peter Maybarduk
Director, Access to Medicines Program
Public Citizen
[1] AbbVie, CEO Rick Gonzalez on Acquisition of Allergan Conference Call Transcript (June 25 2019), https://tinyurl.com/vsm7pdg.
[2] Public Citizen, By Any Means Necessary: How Allergan Gamed the System to Raise Drug Prices and Flood the Country with Pills (2020), https://www.citizen.org/article/by-any-means-necessary/
[3] Public Citizen, A Pandemic Is No Time For Mergers, https://www.citizen.org/news/a-pandemic-is-no-time-for-corporate-mergers/?eType=EmailBlastContent&eId=e0b47206-8512-45a0-8d84-282d62489556
[4] Dissenting Statement of Commissioner Rohit Chopra in the Matter of AbbVie Inc. and Allergan plc.: https://www.ftc.gov/public-statements/2020/05/dissenting-statement-commissioner-rohit-chopra-matter-abbvie-inc-allergan
[5] IMAK, Overpatented, Overpriced: Special Humira Edition (2019).
[6] Id.
[7] INSTITUTE FOR CLINICAL AND ECONOMIC REVIEW, Unsupported Price Increase Report (Oct. 8 2019), https://icer-review.org/wp-content/uploads/2019/01/ICER_UPI_Final_Report_and_Assessment_100819_Final.pdf.
[8] Id.
[9] Id at 17.
[10] Plaintiff’s Consolidated Complaint, In re Asacol Antitrust Litig Civil Action No. 1:15-cv-12730, p.41. See also DELZICOL: HOW NEW IS IT? (July 27 2013), https://www.youtube.com/watch?v=eNtahEEygHI (video of woman opening new capsule to find original tablet).
[11] Jared Hopkins, Drugmakers Raise Prices on Hundreds of Medicines, THE WALL STREET JOURNAL (Jan. 1 2019), https://tinyurl.com/y8bo6nh8.
[12] Letter by Consumer Groups Asking FTC to Investigate Merger (Sept 12. 2019), https://tinyurl.com/usptqzz (noting how merger could exacerbate anticompetitive conduct).
[13] Public Citizen, By Any Means Necessary: How Allergan Gamed the System to Raise Drug Prices and Flood the Country with Pills (2020), https://www.citizen.org/article/by-any-means-necessary/
[14] Markus Meier et al., OVERVIEW OF FTC ACTIONS IN PHARMACEUTICAL PRODUCTS AND DISTRIBUTION, FEDERAL TRADE COMMISSION (June 2019), https://tinyurl.com/v3pvjzf.