Published on Apr 03, 2020
A coalition of consumer groups and unions today wrote Federal Trade Commission Chairman Joe Simons requesting that the commission secure additional behavioral relief before voting out a consent order clearing AbbVie’s (ABBV) $63 billion acquisition of biopharma giant Allergan (AGN).
In the letter reviewed by The Capitol Forum, the coalition said that without modifications including a provision preventing AbbVie from offering volume rebates to health plans, the settlement requiring Allergan to divest pipeline IL-23 inhibitor brazikumab to AstraZeneca (AZN) wouldn’t meet the FTC’s goals.
“[T]o effectively restore competition and protect the thousands of patients using these vital drugs we hope the Commission clearly addresses the problem of rebate walls and secures a remedy that fully protects competition,” the letter said.
The coalition has already sent two letters to the FTC during the merger review, but its most recent—and presumably final—communication is more targeted than prior efforts, and a response to issues that had arisen during earlier meetings with FTC staff and commissioners’ offices, the coalition wrote.
The letter comes as a settlement package that would clear the way for the deal to close is awaiting a commission vote after winning a positive recommendation from Bureau of Competition Director Ian Conner, The Capitol Forum reported earlier today.
AbbVie and FTC spokespeople declined to comment on the letter. An Allergan spokesperson didn’t respond to a request for comment.
Coalition letter. The unions and consumer groups opposing the deal represent over 10 million members, and include the American Federation of State, County, and Municipal Employees, Services Employees International Union, Consumer Action, Public Citizen, and the American Federation of Teachers.
The letter argued that AbbVie’s use of rebate walls, or volume-based rebates that manufacturers provide to health plans to secure preferred formulary access, would “severely impair any remedy chosen by the Commission.”
This concern is merger-specific, the coalition wrote, noting that the question had come up during earlier FTC meetings.
“Clearly combining AbbVie and Allergan’s blockbuster drugs will increase their bargaining leverage,” the coalition said, and heighten AbbVie’s ability and incentive to implement rebate walls preventing rivals, including AstraZeneca, from successfully entering immunology markets.
The letter also argued that the proposed consent order falls short on both divestiture asset and buyer dimensions.
Rather than brazikumab, the commission should require AbbVie to divest its own on-market Skyrizi, which has already secured acceptance and prescription volume and would give a divestiture buyer a superior IL-23 platform through which to expand, the coalition wrote.
The finalized consent also requires Allergan to divest pancreatic enzyme therapies Zenpep and Viokace to Nestlé (SWX: NESN).
But the letter focused in particular on AstraZeneca’s purported weakness as a buyer for brazikumab.
“We believe that AstraZeneca is not a suitable buyer because it does not have the incentive nor ability to fully restore competition,” the coalition wrote, noting that the company has shown an inconsistent commitment to immunology that has in recent years included selling off much of its gastrointestinal portfolio, including brazikumab, which it out-licensed to Allergan in 2016.
AstraZeneca’s deal to re-acquire the drug’s rights, through which it won’t pay an upfront purchase price and Allergan has committed to fund the project’s development costs, also raises red flags, the letter argued.
“[I]f this divestiture of a pipeline product to a firm with no financial commitment and no product portfolio, facing a scheme of rebate walls that has excluded other rivals fails, consumers will not be protected one iota,” the coalition said.
And even if the commission ultimately signs off on the divestiture buyer and assets, the coalition argued, a consent order that doesn’t prohibit AbbVie from using rebate walls to exclude competing IL-23s from health plan drug formularies would fall short.
“Competition can only be restored if AstraZeneca can market brazikumab without having to face AbbVie’s rebate wall,” the letter said.
AbbVie’s March 17 press release announcing the signed FTC consent decree guided a May deal close. The merger is also subject to Irish High Court approval, where a court date is set for May 6.
Trump administration officials, including HHS Secretary Alex Azar and former FDA Commissioner Scott Gottlieb, have spoken out against rebate wall practices, the letter noted.
“I am very much aware that these rebate walls can prevent competition and new entrants into the system,” Azar told a Senate committee in 2018.