AbbVie/Allergan: Settlement Package Secures Front Office Sign-Off, Moves to Commission Level

Published on Apr 03, 2020

An FTC settlement package that would clear the way for AbbVie (ABBV) to close its $63 billion acquisition of biopharma giant Allergan (AGN) has won a positive recommendation from Bureau of Competition Director Ian Conner and is now at the commission level awaiting a vote, sources familiar with the matter said.

AbbVie and Allergan disclosed on March 17 that they had executed a consent agreement to address FTC staff’s concerns with the deal. The settlement would require the companies to divest Allergan’s pipeline IL-23 inhibitor brazikumab to AstraZeneca (AZN), and pancreatic enzyme therapies Zenpep and Viokace to Nestlé (SWX: NESN).

Conner said in a September 2018 blog post that front office and commission review of signed consent orders is typically a four-week process, with a settlement package usually spending two weeks at the bureau level and an additional two weeks with the commissioners.

But this timing guidance has often fallen by the wayside in recent months, and some consent orders have lingered at the commission level for an extended time period.

This has been, in part, due to frequent dissents from the commission’s two Democrats. These split decisions have extended the typical timeline for commission action on controversial settlement packages to closer to four weeks, as the commissioners author, exchange, and respond to dissenting and concurring statements.

Covid-19 considerations could further complicate the timeline in this case. Conner said in a March 16 blog post that virtually all FTC employees are working remotely in response to the novel coronavirus, and that the commission’s internal and external meetings would occur via phone or videoconference.

In the March 17 press release announcing the executed consent order, AbbVie and Allergan said they expected to close their transaction in May. In addition to FTC clearance, the merger requires Irish High Court approval, where a court date is set for May 6.

Spokespeople for the FTC, AbbVie, and Allergan didn’t respond to requests for comment.

Commission dynamics. Bureau Director Conner’s sign-off on the finalized settlement package is a very strong sign that majority of commissioners will ultimately vote to accept it.

But whether the consent will win unanimous consent is an open question.

The commission’s two Democrats, Rebecca Slaughter and Rohit Chopra, have voted against a number of recent pharma-related settlements, including a November consent clearing the way for Bristol-Myers Squibb’s $74 billion acquisition of Celgene, and a March settlement involving Danaher’s $21.4 billion purchase of GE Biopharma.

The AbbVie/Allergan transaction has already encountered some public and political opposition, including from nine Democratic senators who in September wrote to the commission expressing concern that the deal could increase prescription drug prices and reduce innovation.

And a consortium of unions and public interest groups in February wrote to Conner arguing that a consent order including only the Zenpep and brazikumab divestitures—without additional conditions—wouldn’t restore competition lost from the deal.

The groups asked that any FTC consent order include a provision restricting AbbVie’s use of “rebate walls,” or volume discounts to health plans, which the coalition said the company could use to foreclose competition from new entrants including brazikumab buyer AstraZeneca.

Even if one or both of Slaughter or Chopra opposes the settlement, finalized consent orders don’t reach the commission level without at least implicit sign-off from FTC Chairman Joe Simons, and it would be highly unusual—if not entirely unprecedented—for a chair to lose a member of his majority on a package that staff and the bureau director had recommended.

Christine Wilson and Noah Phillips are the commission’s other two Republicans. Before joining the commission, Phillips worked for Sen. John Cornyn (R-TX) from 2011 to 2018, where he served as the senator’s chief counsel on the Judiciary Committee.

Cornyn has been a critic of AbbVie, and during a February 2019 Senate hearing grilled the company’s CEO, Rick Gonzalez, on its “patent thicket” around blockbuster anti-inflammatory drug Humira, which the senator said had served to prevent cheaper biosimilars from entering the market.