Pharmaceutical companies AbbVie Inc. and Allergan plc have agreed to divest assets to settle Federal Trade Commission charges that AbbVie’s proposed $63 billion acquisition of Allergan would violate federal antitrust law.
Following an extensive investigation, the FTC alleges that the proposed acquisition would likely result in substantial competitive harm to consumers in the market for treatment of exocrine pancreatic insufficiency, or EPI, a condition that results in the inability to digest food properly. The FTC also alleges that the acquisition would eliminate future direct competition between AbbVie and Allergan in the development and sales in the U.S. of IL-23 inhibitor drugs for treatment of moderate-to-severe Crohn’s disease and moderate-to-severe ulcerative colitis.
Under the proposed consent agreement, AbbVie and Allergan are required to divest to Nestlé, S.A. Allergan’s assets related to EPI drugs Zenpep and Viokace. AbbVie and Allergan also are required to transfer to AstraZeneca plc. Allergan’s rights and assets related to brazikumab—an IL-23 inhibitor that is in development to treat moderate-to-severe Crohn’s disease and ulcerative colitis. The Bureau of Competition conducted a lengthy vetting process to ensure the ability and incentive of the proposed divestiture buyers to preserve competition that would otherwise be lost under the proposed acquisition.
According to the complaint, only four companies sell pharmaceutical products to treat EPI. Among them, AbbVie and Allergan together control 95 percent of the market for these drugs. According to the FTC, Nestlé operates Nestlé Health Science, a multinational integrated health company with a focus on nutritional products, including on products for those facing gastrointestinal disorders. Nestlé SA is a multibillion company and household name. After completing the vetting process of the proposed divestiture buyers, the Bureau of Competition staff have concluded that Nestlé Health Services and its leadership have the expertise, U.S. sales infrastructure, and resources to maintain the competition that otherwise would have been lost due to the proposed acquisition.
Because ulcerative colitis and Crohn’s disease are both conditions that cause chronic inflammation of the digestive tract, a variety of drugs are approved by the U.S. Food and Drug Administration to treat either condition; however, their effectiveness is limited, the complaint states. A small group of companies sells or is developing a class of drugs known as IL-23 inhibitors, which treats both conditions. Johnson & Johnson sells Stelara, the only FDA-approved IL-23 inhibitor treatment for both conditions. Only three other companies—AbbVie, Allergan, and Eli Lilly and Company—have IL-23 inhibitors in late-stage development. Astra Zeneca was the initial developer of the brazikumab IL-23 inhibitor and had entered into a licensing agreement with Allergan for the product in 2016. The proposed consent ends this agreement and returns to the product to Astra Zeneca under terms that incentivize Astra Zeneca to bring the product to market.
Further details about the consent agreement are set forth in the analysis to aid public comment for this matter. The proposed consent order also appoints a monitor to ensure compliance.
Over the course of their ten-month investigation, Commission staff explored a wide range of theories of competitive harm, including harm to innovation. They uncovered no evidence of such harms beyond those remedied by the proposed consent, after conducting more than 40 interviews, reviewing extensive written submissions from third parties, and reviewing more than 430,000 documents.
Competition enforcement agencies around the world reviewed this transaction. Commission staff cooperated with antitrust agencies in Canada, the European Union, Mexico, and South Africa, working closely with the staff of the European Commission to analyze proposed remedies. The Commission staff also worked with the offices of several state Attorneys General in its investigation.
The Commission vote to issue the complaint and accept the proposed consent order for public comment was 3-2. Chairman Joe Simons, along with Commissioners Noah Joshua Phillips and Christine S. Wilson, issued a statement on this matter. Commissioners Rohit Chopra and Rebecca Kelly Slaughter issued dissenting statements.
The FTC will publish the consent agreement package in the Federal Register shortly. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $43,280.