[Federal Register Volume 84, Number 232 (Tuesday, December 3, 2019)]
[Notices]
[Pages 66191-66198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26074]


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FEDERAL TRADE COMMISSION

[File No. 191 0061]


Bristol-Myers Squibb Company and Celgene Corporation; Analysis of 
Agreement Containing Consent Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair methods of competition. 
The attached Analysis of Agreement Containing Consent Orders to Aid 
Public Comment describes both the allegations in the complaint and the 
terms of the consent orders--embodied in the consent agreement--that 
would settle these allegations.

DATES: Comments must be received on or before January 2, 2020.

ADDRESSES: Interested parties may file comments online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write: ``Bristol-Myers Squibb 
Company and Celgene Corporation; File No. 191 0061'' on your comment, 
and file your comment online at https://www.regulations.gov by 
following the instructions on the web-based form. If you prefer to file 
your comment on paper, mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580, or deliver 
your comment to the following address: Federal Trade Commission, Office 
of the Secretary, Constitution Center, 400 7th Street SW, 5th Floor, 
Suite 5610 (Annex D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Kari Wallace (202-326-3085), Bureau of 
Competition, Federal Trade Commission, 600 Pennsylvania Avenue NW, 
Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for November 15, 2019), on the World Wide Web, 
at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 2, 2020. 
Write ``Bristol-Myers Squibb Company and Celgene Corporation; File No. 
191 0061'' on your comment. Your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the https://www.regulations.gov website.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online through the https://www.regulations.gov website.
    If you prefer to file your comment on paper, write ``Bristol-Myers 
Squibb Company and Celgene Corporation; File No. 191 0061'' on your 
comment and on the envelope, and mail your comment to the following 
address: Federal Trade Commission, Office of the Secretary, 600 
Pennsylvania Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580; 
or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If 
possible, submit your paper comment to the Commission by courier or 
overnight service.
    Because your comment will be placed on the publicly accessible 
website at https://www.regulations.gov, you are solely responsible for 
making sure that your comment does not include any sensitive or 
confidential information. In particular, your comment should not 
include any sensitive personal information, such as your or anyone 
else's Social Security number; date of birth; driver's license number 
or other state identification number, or foreign country equivalent; 
passport number; financial account number; or credit or debit card 
number. You are also solely responsible for making sure that your 
comment does not include any sensitive health information, such as 
medical records or other individually

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identifiable health information. In addition, your comment should not 
include any ``trade secret or any commercial or financial information 
which . . . is privileged or confidential''--as provided by Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2)--including in particular competitively sensitive information 
such as costs, sales statistics, inventories, formulas, patterns, 
devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at http://www.ftc.gov to read this Notice and 
the news release describing it. The FTC Act and other laws that the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments that it 
receives on or before January 2, 2020. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Bristol-Myers Squibb Company (``BMS'') and Celgene 
Corporation (``Celgene'') designed to remedy the anticompetitive 
effects resulting from BMS's proposed acquisition of Celgene. The 
proposed Decision and Order (``Order'') contained in the Consent 
Agreement requires Celgene to divest all rights and assets related to 
its Otezla business to Amgen, Inc. (``Amgen'').
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will review the comments received and 
decide whether it should withdraw, modify, or make the Consent 
Agreement final.
    Pursuant to an Agreement and Plan of Merger dated as of January 2, 
2019, BMS plans to acquire all of the voting securities of Celgene in a 
cash and stock transaction with an equity value of approximately $74 
billion (the ``Acquisition''). The Commission's Complaint alleges that 
the proposed Acquisition, if consummated, would violate Section 7 of 
the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal 
Trade Commission Act, as amended, 15 U.S.C. 45, by substantially 
lessening competition in the U.S. market for oral products to treat 
moderate-to-severe psoriasis. The proposed Consent Agreement will 
remedy the alleged violations by preserving the competition that 
otherwise would be lost in this market as a result of the proposed 
Acquisition.

II. The Parties

    Headquartered in New York City, BMS researches, develops, 
manufactures, and sells prescription pharmaceutical products and 
biologic products in several therapeutic areas, including oncology, 
cardiology, virology, and inflammatory diseases. Among other products, 
BMS is developing an oral product to treat moderate-to-severe 
psoriasis. Like BMS, Celgene researches, develops, manufactures and 
sells prescription pharmaceutical products in the United States. 
Celgene markets eight products, including an oral treatment for 
moderate-to-severe psoriasis.

III. The Relevant Product and Structure of the Market

    Psoriasis is a chronic skin disease caused by an overactive immune 
system. The disease causes skin cells to multiply faster than normal 
and leads to a build-up of cells on the skin surface, forming bumpy red 
patches that are covered with white scales, known as plaques. The 
plaques can appear anywhere on the body, although they are most 
commonly found on the scalp, elbows, knees, and lower back. The 
severity of psoriasis (mild, moderate, or severe) is determined based 
upon the percentage of body surface area affected and the parts of the 
body that are affected. Typically, mild psoriasis covers less than 3 
percent of the body, moderate psoriasis covers 3 to 10 percent of the 
body and severe psoriasis covers more than 10 percent of the body.
    When deciding how to treat psoriasis, dermatologists typically 
evaluate the severity of the disease, any risk factors or 
contraindications for the patient, and the patient's preferences. 
Dermatologists consider efficacy data, safety data, and side effect 
profile of each product, as well as mode of administration to select 
the appropriate treatment course for their patients. While many 
injectable and infused products are approved to treat moderate-to-
severe psoriasis, a number of patients object to such injections or 
find them inconvenient. For those patients, dermatologists often select 
an oral product.
    Celgene's apremilast, marketed under the brand name Otezla, is a 
phosphodiesterase 4 inhibitor. Otezla is the most popular oral product 
approved to treat moderate-to-severe psoriasis in the United States. 
Several older oral generic products, including methotrexate and 
acitretin, are approved by the U.S. Food and Drug Administration 
(``FDA'') to treat psoriasis that does not respond to light, topical 
agents, and other forms of therapy. These drugs are still occasionally 
used in the treatment of psoriasis, but most doctors have moved to 
prescribing newer agents with better efficacy, better safety, or a more 
favorable side effect profile for patients with moderate-to-severe 
psoriasis who desire an oral treatment. BMS is developing BMS 986165, 
an oral, selective tyrosine kinase 2 inhibitor that is the most 
advanced oral treatment in development for moderate-to-severe 
psoriasis.

IV. The Relevant Geographic Market

    The United States is the relevant geographic market in which to 
assess the competitive effects of the proposed Acquisition. Oral 
products to treat moderate-to-severe psoriasis are prescription 
pharmaceutical products and regulated by FDA. As such, products sold 
outside the United States, but not approved for sale in the United 
States, do not provide viable competitive alternatives for U.S. 
consumers.

V. Competitive Effects of the Acquisition

    The proposed Acquisition would likely result in substantial 
competitive harm to consumers in the market for

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oral products to treat moderate-to-severe psoriasis. Celgene is 
currently the market leader and BMS would likely be the next entrant 
into the market. Upon entry, BMS 986165 likely will compete directly 
with, and take sales from, Otezla.

VI. Entry Conditions

    Entry in the relevant market would not be timely, likely, or 
sufficient in magnitude, character, and scope to deter or counteract 
the anticompetitive effects of the proposed Acquisition. New entry 
would require significant investment of time and money for product 
research and development, regulatory approval by the FDA, developing 
clinical history supporting the long-term efficacy of the product, and 
establishing a U.S. sales and service infrastructure. Such development 
efforts are difficult, time-consuming, and expensive, and often fail to 
result in a competitive product reaching the market.

VII. The Consent Agreement

    The Consent Agreement eliminates the competitive concerns raised by 
the proposed Acquisition by requiring BMS and Celgene to divest 
Celgene's worldwide Otezla business, including its regulatory 
approvals, intellectual property, contracts, and inventory to Amgen. 
BMS and Celgene also must transfer all confidential business 
information, research and development information, regulatory, 
formulation, and manufacturing reports related to the divested 
products, as well as provide access to employees who possess or are 
able to identify such information. Additionally, to ensure that the 
divestiture is successful and to maintain continuity of supply, the 
proposed Order requires BMS and Celgene to supply Amgen with Otezla for 
a limited time while Amgen establishes its own manufacturing 
capability. The provisions of the Consent Agreement ensure that Amgen 
becomes an independent, viable, and effective competitor in the U.S. 
market.
    Founded in 1980 and headquartered in Thousand Oaks, California, 
Amgen discovers, develops, manufactures and sells innovative human 
pharmaceutical and biologic products. Amgen's existing business 
includes products that are highly complementary to the divestiture 
assets. Amgen has the expertise, U.S. sales infrastructure, and 
resources to restore the competition that otherwise would have been 
lost due to the proposed Acquisition.
    BMS and Celgene must accomplish the divestitures no later than ten 
days after consummating the proposed Acquisition. If the Commission 
determines that Amgen is not an acceptable acquirer, or that the manner 
of the divestitures is not acceptable, the proposed Order requires BMS 
and Celgene to unwind the sale of rights and assets to Amgen and then 
divest the affected product to a Commission-approved acquirer within 
six months of the date the Order becomes final. To ensure compliance 
with the Order, the Commission has agreed to appoint a Monitor to 
ensure that BMS and Celgene comply with all of their obligations 
pursuant to the Consent Agreement and to keep the Commission informed 
about the status of the transfer of the Otezla rights and assets to 
Amgen. The proposed Order further allows the Commission to appoint a 
trustee in the event that BMS and Celgene fail to divest the products 
as required.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement, and it is not intended to constitute an official 
interpretation of the proposed Order or to modify its terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.

Statement of Commissioner Noah Joshua Phillips

    I write to address the dissenting statements issued by my 
colleagues, Commissioners Chopra and Slaughter.
    From these statements, a reader unfamiliar with the U.S. antitrust 
laws could be forgiven for gleaning several inaccurate conclusions. 
First, companies in the U.S. may not merge unless the antitrust 
enforcement agencies permit them to do so. Second, to stop a merger, 
the government need not provide any theory as to why a merger violates 
the law, nor any evidence to support that theory. Third, antitrust 
enforcement agencies can and should condemn mergers they cannot prove 
violate the law because the agencies deem the business justifications 
for the merger insufficient.
    The unfamiliar reader would be wrong on each count. That is not the 
law. (Nor, for that matter, is it sound policy.)
    The structural remedy agreed to by the merging parties in this case 
addresses every competition concern uncovered after an extensive 
investigation. Every one. But Commissioners Chopra and Slaughter still 
dissent. Why?
    Commissioner Chopra cites a study purporting to show that mergers 
``can choke off innovation''. Okay. But how does this merger do that? 
Without an answer to that question, the logic is rather like saying an 
individual defendant is guilty of a crime because there is too much of 
that crime in society. Thank goodness that is not how our criminal 
justice system works.
    He next writes that we must approach our investigations of 
pharmaceutical mergers with careful scrutiny and with great humility. I 
agree completely. What I fail to see is how careful scrutiny and great 
humility lead to the conclusion, without any clearly articulated theory 
of liability or facts to support it, that this merger violates the 
law--or, again without any facts in support, that the remedy is 
inadequate.
    The next basis Commissioner Chopra offers for his dissent is his 
view that the merger is animated by financial and tax considerations, 
which he deems insufficient to justify the merger. Leaving aside the 
question of why he thinks the job of antitrust enforcers is to value-
judge a merger beyond its impact upon competition, that gets the law 
precisely backwards. The parties get to merge unless we can show a harm 
to competition, not the other way round.
    His dissent also alludes to ``distorted'' incentives of the buyer 
due to the overlapping ownership of the parties. I must admit that the 
precise meaning of that escapes me. Perhaps it is a reference to the 
theory of ``common ownership'', which has stoked great academic debate 
and about which I have spoken repeatedly.\1\ Whatever the meaning, 
Commissioner Chopra fails to articulate how the merger will distort the 
buyer's incentives, much less in a way that violates the law. To sue, 
or to seek an additional remedy, we need more.
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    \1\ Noah Joshua Phillips, Commissioner, U.S. Fed. Trade Comm'n, 
Taking Stock: Assessing Common Ownership, Address at the Global 
Antitrust Economics Conference (June 1, 2018), https://www.ftc.gov/system/files/documents/public_statements/1382461/phillips_-_taking_stock_6-1-18_0.pdf; Noah Joshua Phillips, Commissioner, U.S. 
Fed. Trade Comm'n, Competing for Companies: How M&A Drives 
Competition and Consumer Welfare, Address at the Global Antitrust 
Economics Conference (May 31, 2019), https://www.ftc.gov/system/files/documents/public_statements/1524321/phillips_-_competing_for_companies_5-31-19_0.pdf.
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    The dissenting commissioners both criticize the Commission's 
investigations of pharmaceutical mergers generally, expressing concern 
that they fail to capture all the harms to competition posed by such 
mergers.\2\ But, again, the most they offer is speculation about 
vaguely articulated harms, without reference to any

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evidence that this merger is likely to exacerbate them. Nor do the 
dissenters cite a previous case that resulted in anticompetitive 
effects that they insinuate the Commission missed. The dissenting 
statements mention various violations of the antitrust laws committed 
by firms in the pharmaceutical industry, but neither explains how this 
merger makes such conduct more likely. For decades, the Federal Trade 
Commission has pursued enforcement against many different kinds of 
anticompetitive conduct in the pharmaceutical industry. That work, 
critical to controlling healthcare costs for Americans, will continue.
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    \2\ Like Commissioner Wilson, I believe staff conducted a 
careful investigation of this merger. See Statement of Commissioner 
Christine S. Wilson, In the Matter of Bristol-Myers Squibb Company/
Celgene Corporation.
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    Neither dissenting commissioner argues that the consent order and 
associated divestiture are bad for competition or consumers, or 
identifies any additional remedy they believe is warranted. And neither 
proposes any basis to sue to stop the merger.\3\ So, again, why 
dissent? At the end of the day, we are left only with the sense that 
Commissioners Chopra and Slaughter feel the merger will threaten 
competition and wish to dissociate themselves with it. To me, that is 
not enough. (Even if it were, a vote to join Commissioners Chopra and 
Slaughter would result, at the end of the day, in the merger without 
the remedy. Are they calling on their colleagues to vote with them?)
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    \3\ In fairness, Commissioner Chopra does state his view that 
the agency should litigate to block more pharmaceutical mergers 
outright. But he fails to answer whether the Commission should 
litigate this case, and--more importantly--on what legal and factual 
basis. That is the question we face today.
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    Returning to our unfamiliar reader, here is how the law actually 
works. First, to block a merger outright, U.S. antitrust enforcement 
agencies must convince a judge that it violates the law. In this 
country, where people and companies are free to do what they wish with 
their property subject to the constraints imposed by the law, our 
judges are somewhat hostile to the notion that we should block a merger 
when the parties have agreed to address every problem that we can 
identify. Second, we need to articulate a viable theory of harm to 
competition posed by the merger and produce evidence to support that 
theory. Third, our job is to enforce the antitrust laws, which guard 
against particular (competitive) harms that mergers may present. Other 
parts of the government guard against other harms posed by mergers, for 
example the Committee on Foreign Investment in the United States, which 
looks at certain investments for their potential impact on national 
security,\4\ or the Securities and Exchange Commission, which reviews 
transactions to protect investors.\5\ Our job is not to opine on 
whether a merger is ``good'' or ``bad'' for society as a whole, or to 
use our authority to make sure firms merge for reasons that someone 
might like (innovation) as opposed to reasons that they may not 
(tax).\6\
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    \4\ See 50 U.S.C. 4565.
    \5\ See, e.g., 15 U.S.C. 78m(d), 78n(d).
    \6\ This is not to say that we should view financial or tax 
considerations as improper motivations for a merger.
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    In reviewing the dissenting statements, readers--unfamiliar and 
otherwise--would do well to keep all of that in mind.

Statement of Commissioner Christine S. Wilson

    The Commission has accepted, subject to final approval after 
receiving public comments, an Agreement Containing Consent Order from 
Bristol-Myers Squibb Company and Celgene Corporation that remedies the 
anticompetitive effect that otherwise would arise from BMS's proposed 
acquisition of Celgene. All members of the Commission (including 
Commissioners Chopra and Slaughter) \1\ agree that the only evidence of 
harm to competition that staff found was in the market for oral 
products that treat moderate-to-severe psoriasis.\2\ All members of the 
Commission also agree that the remedy in that market--a complete 
divestiture of all of Celgene's products and associated assets in that 
area--will preserve competition in that market. Moreover, this $13 
billion divestiture is the largest in the history of U.S. merger 
enforcement.
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    \1\ See Dissenting Statement of Commissioner Rebecca Kelly 
Slaughter, In the Matter of Bristol-Myers Squibb and Celgene; 
Dissenting Statement of Commissioner Rohit Chopra on Bristol-Myers 
Squibb/Celgene.
    \2\ While Commissioner Chopra agrees that there is no evidence 
of harm to innovation, he concludes that the lack of evidence 
implies there is a problem with the investigative process. I 
disagree with Commissioner Chopra's hypothesis.
    Staff conducted the investigation of this proposed transaction 
in the same careful manner that all pharmaceutical transactions are 
investigated. The investigation examined the likely competition 
between and among all of BMS and Celgene's current products and 
those now in development. The investigation identified a likely harm 
to innovation involving oral products to treat moderate-to-severe 
psoriasis; the identified overlap includes a product that is still 
in development by BMS. In addition, staff investigated whether the 
proposed transaction would decrease innovation competition; instead, 
the investigation found that reduced innovation competition was 
unlikely.
    Moreover, there is no reason to believe there will be reduced 
innovation in the pharmaceutical industry as a result of this 
transaction. No fewer than 711 companies are conducting late-stage 
research and development in oncology, the therapeutic category in 
which BMS and Celgene conduct research. See IQVIA Institute Global 
Oncology Trends 2019, at 19, May 2019, available at https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/global-oncology-trends-2019.pdf.
    To support his hypothesis that there must be additional 
unidentified harm to innovation, Commissioner Chopra seeks to 
introduce factors outside the analytical framework demanded by the 
statutes enforced by the Commission, including Section 7 of the 
Clayton Act, without offering any evidence to show that these non-
competition factors may reduce innovation.
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    I agree with Commissioner Slaughter that pharmaceutical price 
levels in the United States today are cause for concern. And there is 
ample evidence that prices of branded pharmaceuticals have increased 
much faster--perhaps six to eight times as fast--as prices in the rest 
of the economy.\3\
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    \3\ See, e.g., Suzanne M. Kirchhoff et al., Congressional 
Research Service, Frequently Asked Questions About Prescription Drug 
Pricing and Policy, at 8-9 (Apr. 24, 2018), available at https://fas.org/sgp/crs/misc/R44832.pdf (plotting CPI-U data from the U.S. 
Bureau of Labor Statistics); Stephen W. Schondelmeyer & Leigh 
Purvis, AARP Public Policy Institute, Rx Price Watch Report: Trends 
in Retail Prices of Brand Name Prescription Drugs Widely Used by 
Older Americans: 2017 Year-End Update, at 6-8 (Sept. 2018), 
available at https://www.aarp.org/content/dam/aarp/ppi/2018/09/trends-in-retail-prices-of-brand-name-prescription-drugs-year-end-update.pdf (using data from Truven MarketScan to estimate that 
``brand name drug prices went up more than 8.5 times the rate of 
general inflation during [the] 12-year period [from December 31, 
2005 to December 31, 2017]''); Robert Pearl, How Big Pharma Might Be 
Cut Down to Size, Forbes.com, May 11, 2017, available at https://www.forbes.com/sites/robertpearl/2017/05/11/how-big-pharma-might-be-cut-down-to-size/ (``[A]ccording to the U.S. Bureau of Labor 
Statistics, prices for U.S.-made pharmaceuticals have climbed over 
the past decade six times as fast as the cost of goods and services 
overall.''); Charles Silver & David A. Hyman, Overcharged: Why 
Americans Pay Too Much for Health Care 25-27 (2018) (discussing 
analyses from Schondelmeyer & Purvis, Pearl, and others).
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    Unfortunately, many of the causes of higher drug prices, including 
systemic distortions created by massive regulatory regimes and a 
pervasive principal/agent problem, fall outside the jurisdiction and 
legal authority of the Federal Trade Commission. But within its limited 
authority as a competition agency, the Commission can--and does--pursue 
a comprehensive agenda to address anticompetitive mergers and unlawful 
conduct in the pharmaceutical industry. Specifically, the Commission:
     Carefully Screens Pharmaceutical Mergers: Similar to the 
current enforcement action, the Commission routinely has challenged 
anticompetitive mergers and acquisitions. During the past five years, 
the Commission has issued complaints challenging 13 mergers and 
required the divestiture of 130 branded and generic products to address 
competitive overlaps for the sale or development of particular 
drugs.\4\
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    \4\ See Baxter Int'l Inc., Dkt. No. C-4620 (F.T.C. July 20, 
2017); Amneal Holdings, LLC, Dkt. No. C-4650 (F.T.C. Apr. 27, 2018); 
FTC v. Mallinckrodt ARD Inc., No. 1:17-cv-00120 (D.D.C. Jan. 18, 
2017); Mylan, N.V., Dkt. No. C-4590 (F.T.C. July 26, 2016); Teva 
Pharmaceutical Indus. Ltd., Dkt. No. C-4589 (F.T.C. July 26, 2016); 
Hikma Pharmaceuticals PLC, Dkt. No. C-4572 (F.T.C. Mar. 28, 2016); 
Hikma Pharmaceuticals PLC, Dkt. No. C-4568 (F.T.C. Feb. 26, 2016); 
Lupin Ltd., Dkt. No. C-4566 (F.T.C. Feb. 18, 2016); Endo Int'l PLC, 
Dkt. No. C-4539 (F.T.C. Sept. 24, 2015); Pfizer Inc., Dkt. No. C-
4537 (F.T.C. Aug. 21, 2015); Impax Labs, Inc., Dkt. No. C-4511 
(F.T.C. Mar. 5, 2015); Novartis AG, Dkt. No. C-4510 (F.T.C. Feb. 20, 
2015); Sun Pharmaceutical Indus. Ltd, Dkt. No. C-4506 (F.T.C. Jan. 
30, 2015).

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[[Page 66195]]

     Combats Anticompetitive Patent Litigation Settlements: In 
2013, the FTC won a landmark victory at the Supreme Court in the 
Actavis case,\5\ and has prevailed in subsequent challenges of similar 
agreements. For instance, earlier this year, the Commission issued a 
unanimous opinion condemning a patent litigation settlement after 
finding that the brand manufacturer possessed market power in the 
market for branded and generic oxymorphone ER, the potential generic 
entrant received a large and unjustified payment, and the respondent 
failed to show a cognizable justification for the restraint.\6\ The 
Commission's successful challenges of prior settlements have 
substantially reduced the number of anticompetitive patent litigation 
settlements into which companies are entering today.
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    \5\ FTC v. Actavis, Inc., 570 U.S. 136 (2013).
    \6\ See, e.g., Impax Laboratories, Inc., Dkt. No. 9373 (F.T.C. 
April 3, 2019) (Commission Decision).
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     Challenges Abuse of FDA Regulatory Processes: The 
Commission has brought several cases alleging that pharmaceutical 
companies misuse FDA regulatory processes to impede competition. For 
example, in 2014 the FTC challenged a pharmaceutical company for 
abusing the litigation process by filing meritless patent lawsuits 
against competitors to keep them off the market. The Commission won a 
judgment for $448 million.\7\ The FTC also sued Shire ViroPharma in 
2017, alleging anticompetitive abuse of the FDA citizen-petition 
process to keep the FDA from approving the competitive products, 
thereby keeping those lower-cost drugs off the market. (Unfortunately, 
the Commission lost the case on a statutory construction issue that 
kept the Court of Appeals from ruling on the merits of the 
allegations.\8\) And under Chairman Tim Muris, the FTC challenged 
wrongful listings in the FDA Orange Book \9\ by BMS, one of the very 
parties before us today, that allegedly were used obtain unwarranted 
automatic 30-month stays of FDA approval of generic pharmaceuticals 
that would have competed with BMS branded products.\10\
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    \7\ FTC v. AbbVie, Inc. 329 F. Supp. 3d 98 (E.D. Pa. 2018).
    \8\ FTC v. Shire ViroPharma, Inc., 917 F.3d 147, 156 (3d Cir. 
2019).
    \9\ Pursuant to the FDC Act, a brand-name drug manufacturer 
seeking to market a new drug product must first obtain FDA approval 
by filing a New Drug Application (``NDA''). At the time the NDA is 
filed, the NDA filer must also provide the FDA with certain 
categories of information regarding patents that cover the drug that 
is the subject of its NDA. 21 U.S.C. 355(b)(1). Upon receipt of the 
patent information, the FDA is required to list it in an agency 
publication entitled ``Approved Drug Products with Therapeutic 
Equivalence,'' commonly known as the ``Orange Book.'' Id. Sec.  
355(j)(7)(A).
    \10\ See Complaint, Bristol-Myers Squibb Co., Dkt. No. C-4076 
(F.T.C. filed Apr. 14, 2003).
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     Advocates for the Reform of Misused Regulations: The FTC 
advised the FDA and Congress of possible abuses of the Risk Evaluation 
and Mitigation Strategy (REMS) framework to forestall competitors' 
entry by denying access to branded drugs required to conduct 
bioequivalence testing, a gating factor for FDA approval to launch.\11\ 
In remarks before a Subcommittee of the Senate Committee on Commerce, 
Science, and Transportation, I encouraged Congress to take action on 
this front.\12\ And under the bipartisan leadership of first Chairman 
Bob Pitofsky and then Chairman Tim Muris, the FTC conducted a 6(b) 
study of generic drugs and issued a report recommending refinements to 
the Hatch Waxman Act and changes to the FDA regulatory framework, many 
of which were implemented, so as to fulfill the original balance of 
innovation and competition struck by the Hatch Waxman Act.
---------------------------------------------------------------------------

    \11\ See, e.g., Statement of the Federal Trade Commission to the 
Department of Health and Human Services Regarding the HHS Blueprint 
to Lower Drug Prices and Reduce Out-of-Pocket Costs (July 16, 2018); 
Prepared Statement of Markus H. Meier, Acting Director, Bureau of 
Competition, Federal Trade Commission before the U.S. House of 
Representatives, Judiciary Committee, Subcommittee on Regulatory 
Reform, Commercial and Antitrust Laws, on ``Antitrust Concerns and 
the FDA Approval Process'' (July 27, 2017).
    \12\ See Commissioner Christine S. Wilson, Oral Statement before 
Senate Committee on Commerce, Science & Transportation, Subcommittee 
on Consumer Protection, Product Safety, Insurance, & Data Protection 
(Nov. 27, 2018).
---------------------------------------------------------------------------

     Challenges Novel Anticompetitive Strategies As They Arise: 
Earlier this year the Commission challenged and settled a case against 
Reckitt Benckiser Group plc alleging that Reckitt introduced a film 
version of Suboxone, which treats opioid addiction, and pushed the 
market to use the film version rather than the existing tablet version 
that was about to face generic competition.\13\ The complaint alleged 
that Reckitt pushed the market toward the film and away from the 
tablets by claiming the film was safer than tablets while having no 
data to back up the claim and significantly raising the price of the 
tablet when the film was costlier to make. Under the terms of the 
settlement, Reckitt was required to contribute $50 million to a fund to 
be distributed to those who were overcharged.\14\
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    \13\ See Joint Motion for Entry of Stipulated Order for 
Permanent Injunction and Equitable Monetary Relief, FTC v. Reckitt 
Benckiser Group, PLC, No. 1:19-cv-00028 (W.D. Va. filed July 11, 
2019).
    \14\ I was recused from this enforcement action because, before 
joining the Commission, I represented a generic drug company before 
the FTC and FDA challenging this anticompetitive conduct.
---------------------------------------------------------------------------

     Informs Courts of Relevant Competition Principles and 
Policies: The Commission has filed briefs as amicus curiae in cases 
involving patent litigation settlements,\15\ REMS and restricted 
distribution systems,\16\ and product hopping.\17\
---------------------------------------------------------------------------

    \15\ See, e.g., Br. of amicus curiae Federal Trade Commission in 
Support of Plaintiffs-Appellants, In re Lamictal Direct Purchaser 
Antitrust Litigation, No. 2:12-cv-995, (3d Cir. filed Apr. 28, 2014) 
(explaining that a commitment not to introduce an authorized generic 
product is the type of settlement subject to antitrust scrutiny); 
Supp. Br. of amicus curiae Federal Trade Commission in Support of 
Plaintiffs-Appellants, In re Effexor XR Antitrust Litig., No. 3:11-
cv-05479 (3d Cir. filed Mar. 17, 2016) (explaining that litigation 
settlements among private parties are private commercial agreements 
and are not exempt from antitrust scrutiny under the Noerr 
doctrine).
    \16\ See, e.g., Br. of amicus curiae Federal Trade Commission, 
Mylan Pharmaceuticals, Inc. v. Celgene, No. 2:14-cv-2094 (D.N.J. 
filed June 17, 2014) (explaining that a monopolist's refusal to sell 
to potential competitors may, under certain limited circumstances, 
violate Section 2 of the Sherman Act and that a brand name drug 
manufacturer's patents do not reach activities undertaken in 
connection with bioequivalence testing).
    \17\ See Br. of amicus curiae Federal Trade Commission, Mylan 
Pharmaceuticals, Inc. v. Warner Chilcott Public Ltd. Co., No. 12-cv-
3824 (E.D. Pa. filed Nov. 21, 2012) (explaining that minor, non-
therapeutic changes to a branded pharmaceutical product that harm 
generic competition can constitute exclusionary conduct that 
violates U.S. antitrust laws).
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    This list of actions by the FTC is by no means exhaustive.\18\ But 
the message is clear--the FTC uses the full force and weight of its 
authority to protect consumers from unlawful conduct that increases 
prices and reduces innovation in this important sector of our economy.
---------------------------------------------------------------------------

    \18\ For a complete review of the Commission's ongoing and 
extensive efforts to combat anticompetitive mergers and unlawful 
conduct in the pharmaceutical industry, see Markus H. Meier, Bradley 
S. Albert, & Kara Monahan, Overview of FTC Actions in Pharmaceutical 
Products and Distribution (Sept. 2019), available at https://www.ftc.gov/system/files/attachments/competition-policy-guidance/20190930_overview_pharma_final.pdf.
---------------------------------------------------------------------------

    Notwithstanding the Commission's valiant efforts, there are many 
factors that contribute to increasing drug prices but that are not 
cognizable under the antitrust laws, and therefore that the FTC does 
not have the legal authority to fix. Even if the FTC and other 
government enforcers did their job

[[Page 66196]]

flawlessly (and our ``retrospective'' reviews of our past work suggests 
we do quite well), pharmaceutical prices would still rise for many 
other reasons. For example, last year the Trump Administration released 
two reports identifying various market imperfections in health care 
markets, including prescription drug markets, and various regulatory 
and legislative reforms that would increase consumer choice and 
provider competition.\19\ Similarly, former FDA Administrator Scott 
Gottlieb has identified several flaws in the market for biosimilars--
generic biologic medicines--that he believes require Congressional 
action.\20\ And Professors David Hyman (also a former FTC Special 
Counsel) and Charles Silver have identified a host of other legal and 
regulatory factors that increase drug prices,\21\ including FDA delays 
in processing generic applications and a Medicare system pursuant to 
which the government purchases one- third of all retail drugs but is 
barred from negotiating the prices that it pays.\22\
---------------------------------------------------------------------------

    \19\ U.S. Dep't of Health and Human Servs., American Patients 
First: A Trump Administration Blueprint to Lower Drug Prices and 
Reduce Out-of-Pocket Costs (May 2018), available at https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf; U.S. 
Dep't of Health and Human Servs., U.S. Dep't of the Treasury, & U.S. 
Dep't of Labor, Reforming America's Healthcare System Through Choice 
and Competition 63-67 (2018), available at https://www.hhs.gov/sites/default/files/Reforming-Americas-Healthcare-System-Through-Choice-and-Competition.pdf (discussing, e.g., the use of ``any-
willing-provider'' laws in the context of drug prescription plans 
and Medicare Part D). FTC staff consulted with HHS on the latter 
report. See id. at 3 (``Executive Order 13813, . . . requires the 
Secretary of Health and Human Services (HHS), in consultation with 
the secretaries of the Treasury and Labor and the Federal Trade 
Commission, to provide a report to the President.'').
    \20\ Scott Gottlieb, Op-Ed, Don't Give Up on Biosimilars--
Congress Can Give Them a Boost, Wall St. J., Aug. 25, 2019, https://www.wsj.com/articles/dont-give-up-on-biosimilarscongress-can-give-them-a-boost-11566755042.
    \21\ See, e.g., Charles Silver & David A. Hyman, Here's a Plan 
to Fight High Drug Prices that Could Unite Libertarians and 
Socialists, Vox.Com, June 21, 2018, https://www.vox.com/the-big- 
idea/2018/6/21/17486128/prescription-drug-prices-monopolies-epipen-
shkreli-sanders-patents-prizes; see also Statement of Commissioner 
Rebecca Kelly Slaughter, supra note 1, at 2 n.10 (citing Silver & 
Hyman approvingly).
    \22\ See Silver & Hyman, supra note 3, at 53-60.
---------------------------------------------------------------------------

    There is broad concern about prescription drug price levels, and I 
share those concerns. But here, Commission staff conducted a thorough 
investigation and found evidence that the acquisition of Celgene by BMS 
would, if not addressed, diminish competition in one relevant market. 
Commission staff then negotiated a record-breaking consent agreement 
that replaces the competition otherwise lost because of the merger by 
divesting all of Celgene's relevant products and assets to a new and 
robust competitor. Rather than asserting that staff should have found 
something--anything--more to justify asking a court to block the 
transaction, we should recognize the limited authority we have been 
granted by Congress and encourage other responsible governmental actors 
to fix the many problems in this sector that lie beyond our 
jurisdiction.

Dissenting Statement of Commissioner Rebecca Kelly Slaughter

    The Federal Trade Commission has a long history of reviewing 
mergers between pharmaceutical manufacturers using an analytical 
framework that identifies specific product overlaps between the merging 
parties, including of drugs in development, and requiring divestitures 
of one of those products. This approach addresses significant 
competitive concerns in these mergers,\1\ but I am concerned that it 
does not fully capture all of the competitive consequences of these 
transactions.\2\
---------------------------------------------------------------------------

    \1\ Within the standard analytical framework for pharmaceutical 
mergers, the Commission has done a good job of studying the effects 
of previous divestitures, and has taken seriously the lesson that 
divestitures of on-market, rather than pipeline products, are often 
more likely to succeed in preserving competition among the 
overlapping products. See Bruce Hoffman, It Only Takes Two to Tango: 
Reflections on Six Months at the FTC, at 6 (Feb. 2, 2018).
    \2\ The Commission has been very successful in negotiating 
settlements with merging parties to address drug overlaps. The 
Commission has not recently litigated pharmaceutical merger cases, 
and, although merger litigation in other industries and merger 
guidelines provide useful guidance, we simply do not have a 
contemporary body of pharmaceutical merger caselaw to clarify the 
boundaries for our analytical approach.
---------------------------------------------------------------------------

    The consent decree in this case follows the Commission's standard 
approach. It remedies a serious concern about a drug-level overlap 
between BMS's development-stage BMS 986165 (or ``TYK2'') and Celgene's 
on-market Otezla for the treatment of moderate-to-severe psoriasis. 
This is important, and I support the Commission's effort to remedy this 
drug-level overlap. However, I remain concerned that this analytical 
approach is too narrow. In particular, I believe the Commission should 
more broadly consider whether any pharmaceutical merger is likely to 
exacerbate anticompetitive conduct by the merged firm or to hinder 
innovation.
    Several recent developments enhance my concerns. Branded drug 
prices have increased substantially in recent years,\3\ and 
pharmaceutical merger activity persists at a high pace.\4\ The high 
rate of drug company consolidation has coincided with a sea change in 
the structure of pharmaceutical research and development; recent 
studies suggest mergers may inhibit research, development, or approval 
in this changing environment.\5\ In addition, the pharmaceutical 
industry has long been the focus of anticompetitive conduct enforcement 
by both the Commission and private litigants, including for practices 
such as pay-for-delay settlements,\6\ sham litigation,\7\ and 
anticompetitive product hopping.\8\ We must carefully consider the 
facts in each specific merger to understand whether or how it may 
facilitate anticompetitive conduct, and therefore be more likely to 
result in a substantial lessening of competition.
---------------------------------------------------------------------------

    \3\ See IQVIA Institute for Human Data Science, The Global Use 
of Medicine in 2019 and Outlook to 2023, at 11 (Jan. 29, 2019); 
IQVIA Institute for Human Data Science, Medicine Use and Spending in 
the U.S., at 8 (Apr. 19, 2018); Laura Entis, Why Does Medicine Cost 
So Much? Here's How Drug Prices Are Set, Time (Apr. 9, 2019), 
https://time.com/5564547/drug-prices-medicine/; see also Joanna 
Shepherd, The Prescription for Rising Drug Prices: Competition or 
Price Controls?, 27 Health Matrix 315, 315-16 (2017); Aimee Picchi, 
Drug Prices in 2019 are Surging, With Hikes at 5 Times Inflation, 
CBS News (July 1, 2019), https://www.cbsnews.com/news/drug-prices-in-2019-are-surging-with-hikes-at-5-times-inflation/.
    \4\ See Barak Richman, et al., Pharmaceutical M&A Activity: 
Effects on Prices, Innovation, and Competition, 48 Loy. U. Chi. L. 
J. 787, 790-91 (2017); Meagan Parrish, What's Behind all the M&A 
Deals in Pharma, Pharma Manufacturing (July 31, 2019).
    \5\ See Justus Haucap & Joel Stiebale, Research: Innovation 
Suffers When Drug Companies Merge, Harvard Business Review (Aug. 3, 
2016); Justus Haucap & Joel Stiebale, How Mergers Affect Innovation: 
Theory and Evidence From the Pharmaceutical Industry (2016) (finding 
a negative effect on research and development activity of the merged 
firm and rival firms); but see Richman, et al., supra note 4 at 799-
801, 817-18 (finding a positive correlation between increased 
pharmaceutical merger and drug development activity, but noting 
competitive concerns about a ``bottleneck'' in FDA approval).
    \6\ See Press Release, Fed. Trade Comm'n, Last Remaining 
Defendant Settles FTC Suit that Led to Landmark Supreme Court Ruling 
on Drug Company ``Reverse Payments'' (Feb. 28, 2019), https://www.ftc.gov/news-events/press-releases/2019/02/last-remaining-defendant-settles-ftc-suit-led-landmark-supreme.
    \7\ See Press Release, Fed. Trade Comm'n, Statement of FTC 
Chairman Joe Simons Regarding Federal Court Ruling in FTC v. AbbVie 
(June 29, 2018), https://www.ftc.gov/news-events/press-releases/2018/06/statement-ftc-chairman-joe-simons-regarding-federal-court-ruling.
    \8\ See Press Release, Fed. Trade Comm'n, Reckitt Benckiser 
Group plc to Pay $50 Million to Consumers, Settling FTC Charges that 
the Company Illegally Maintained a Monopoly over the Opioid 
Addiction Treatment Suboxone (July 11, 2019), https://www.ftc.gov/news-events/press-releases/2019/07/reckitt-benckiser-group-plc-pay-50-million-consumers-settling-ftc.
---------------------------------------------------------------------------

    Going forward, I hope the Commission will take a more expansive 
approach to analyzing the full range of competitive consequences of

[[Page 66197]]

pharmaceutical mergers. I urge not only the Commission, but also 
researchers and industry experts to think carefully and creatively 
about these cases, and in particular to study the effects of recent 
consummated mergers on drug research, development, and approval. 
Outside of merger enforcement, we should also continue to police 
aggressively business practices that suppress competition. Indeed, as 
Commissioner Chopra and I have explained elsewhere, we should unleash 
the full scope of our authority under Section 5 to combat high drug 
prices.\9\
---------------------------------------------------------------------------

    \9\ See Statement of Commissioners Rohit Chopra and Rebecca 
Kelly Slaughter Regarding the Federal Trade Commission Report on the 
Use of Section 5 to Address Off-Patent Pharmaceutical Price Spikes, 
(June 27, 2019).
---------------------------------------------------------------------------

    The problem of high drug prices is too important to leave any 
potential solutions unexhausted. As a society, we should also consider 
all other policy interventions that would help combat high drug 
prices.\10\
---------------------------------------------------------------------------

    \10\ The problem of high drug prices has prompted a number of 
proposed policy solutions in addition to antitrust enforcement, 
including (1) reference pricing, (2) reforming import restrictions, 
(3) innovation prizes, and (4) Medicare Part D price negotiation. 
See So-Yeon Kang, et al., Using External Reference Pricing in 
Medicare Part D to Reduce Drug Price Differentials With Other 
Countries, 5 Health Aff. 38 (2019); Tim Wu, How to Stop Drug Price 
Gouging, N.Y. Times (Apr. 20, 2017), https://www.nytimes.com/2017/04/20/opinion/how-to-stop-drug-price-gouging.html; Charles Silver & 
David A. Hyman, Here's a Plan to Fight High Drug Prices That Could 
Unite Libertarians and Socialists, Vox (Jun. 21, 2018), https://www.vox.com/the-big-idea/2018/6/21/17486128/prescription-drug-prices-monopolies-epipen-shkreli-sanders-patents-prizes; Juliette 
Cubanski & Tricia Neuman, Searching for Savings in Medicare Drug 
Price Negotiations, Henry J. Kaiser Family Foundation (Apr. 26, 
2018).
---------------------------------------------------------------------------

Dissenting Statement of Commissioner Rohit Chopra

Summary

     Today's troubles in the pharmaceutical industry are well 
known. Drug pricing is out-of-control and innovation is too slow. Given 
the consequences for human life, the FTC must ensure fierce competition 
in this market through close scrutiny of mergers and conduct.
     The agency has scored big victories in court to combat 
anticompetitive conduct in the industry. But, when it comes to mergers, 
Commissioners have typically voted to steer clear of the courtroom, 
instead focusing on settlements that address product overlaps.
     Given the size and potential impact of this massive 
merger, I am skeptical that the status quo approach will uncover the 
range of potential harms to American patients.
    When it comes to life-saving pharmaceuticals, the Federal Trade 
Commission should never ignore serious warning signs that most 
Americans see clearly. Many of us depend on prescription drugs to 
survive, but too many cannot afford the high costs. The argument that 
sky-high prices are necessary for innovation has been falling apart, as 
more evidence reveals that many new drugs seem to be designed to extend 
exclusivity, rather than providing meaningful therapeutic benefits.\1\
---------------------------------------------------------------------------

    \1\ Donald W. Light & Joel R. Lexchin, Pharmaceutical R&D: What 
do we get for all that money?, 345 British Med. J. 22, 24 (2012), 
https://www.bmj.com/bmj/section-pdf/187604?path=/bmj/345/7869/Analysis.full.pdf.
---------------------------------------------------------------------------

    Predicting the anticompetitive effects of massive mergers in any 
industry is difficult. This is especially true in pharmaceuticals, 
where research and discovery are core to competition. Some evidence 
shows that these mergers have choked off innovation,\2\ creating harms 
that are immeasurable for those waiting for a cure.
---------------------------------------------------------------------------

    \2\ See generally, Justus Haucap & Joel Stiebale, How Mergers 
Affect Innovation: Theory and Evidence from the Pharmaceutical 
Industry (D[uuml]sseldorf Inst. for Competition Economics, 
Discussion Paper No. 218, 2016), http://www.dice.hhu.de/fileadmin/redaktion/Fakultaeten/Wirtschaftswissenschaftliche_Fakultaet/DICE/Discussion_Paper/218_Haucap_Stiebale.pdf.
---------------------------------------------------------------------------

Routine vs. Rigor

    Over the years, the agency has worked to combat abuse of 
intellectual property and other anticompetitive conduct by 
pharmaceutical companies, achieving major victories in courts across 
the country. Our approach to pharmaceutical mergers, however, has 
focused primarily on reaching settlements, rather than litigation or 
in-depth merger studies. The agency has focused on seeking divestitures 
of individual products, usually to another major pharmaceutical player.
    There have been longstanding, bipartisan concerns about whether 
this strategy is truly working. For example, in 2005, as he reflected 
on his six years of service as Commissioner, Thomas Leary lamented that 
the agency's approach to these investigations mostly stayed the same, 
despite overarching concerns about other anticompetitive harms.\3\
---------------------------------------------------------------------------

    \3\ Interview with Commissioner Thomas B. Leary, 19 (3) A.B.A. 
Antitrust Health Care Chronicle 1, 5 (2005), https://www.ftc.gov/public-statements/2005/09/health-care-interview-commissioner-thomas-b-leary.
---------------------------------------------------------------------------

    During my time as a Commissioner, I have pushed for the agency to 
be more rigorous across all of our work by opening our eyes to new 
types of analysis and sources of evidence,\4\ while avoiding 
assumptions that may be outdated. Given some of the clear warning signs 
in the industry, we must approach our investigations of pharmaceutical 
mergers with careful scrutiny and great humility about our longstanding 
practices.
---------------------------------------------------------------------------

    \4\ I have previously noted that the agency can enhance its 
assessments of the likelihood of entry by new innovators, as well as 
its approach to vetting the financial condition of divestiture 
buyers. Statement of Commissioner Rohit Chopra, In the Matter of 
Fresenius Medical Care AG & Co. KGaA and NxStage Medical, Inc. (Feb. 
19, 2019), https://www.ftc.gov/public-statements/2019/02/statement-commissioner-chopra-matter-fresenius-medical-care-ag-co-kgaa; 
Statement of Commissioner Rohit Chopra, In the Matter of Linde AG, 
Praxair, Inc., and Linde PLC (Oct. 22, 2018), https://www.ftc.gov/public-statements/2018/10/statement-commissioner-chopra-matter-linde-ag-praxair-inc-linde-plc.
---------------------------------------------------------------------------

    This massive $74 billion merger between Bristol-Myers Squibb (NYSE: 
BMY) and Celgene (NASDAQ: CELG) may have significant implications for 
patients and inventors, so we must be especially vigilant. In my view, 
this transaction appears to be heavily motivated by financial 
engineering \5\ and tax considerations \6\ (as opposed to a genuine 
drive for greater discovery of life-saving medications), without clear 
benefits to patients or the public. The buyer's incentives might also 
be distorted, given overlaps in ownership.\7\

[[Page 66198]]

In addition, there are also concerns about a history of anticompetitive 
conduct.\8\ Expansive investigation for mergers like these is time well 
spent.
---------------------------------------------------------------------------

    \5\ This transaction will lead to changes in the merged firm's 
capital structure, as well as an acceleration of share buybacks. I 
fear that these changes will alter the firm's incentives in ways 
that might increase the likelihood of anticompetitive conduct. See 
Bristol-Myers Squibb, Press Release, Bristol-Myers Squibb Announces 
Agreement Between Celgene and Amgen to Divest OTEZLA[supreg] for 
$13.4 Billion (Aug. 26, 2019, 6:30 a.m.), https://news.bms.com/press-release/corporatefinancial-news/bristol-myers-squibb-announces-agreement-between-celgene-and-a.
    \6\ Tax avoidance appears to be one of the primary motivations 
of the deal, rather than a meaningful increase in the firms' ability 
to innovate or operate effectively. See, e.g., Siri Bulusu, Celgene 
Holders May See Tax Benefit From Bristol-Myers Deal (1), Bloomberg 
Tax (Jan. 4, 2019, 4:43 p.m.), https://news.bloombergtax.com/daily-tax-report/celgene-holders-may-see-tax-benefit-from-bristol-myers-deal-1 (noting that the buyer went out of its way to make sure the 
stock component of the merger will be taxable and describing how 
that tax would be deductible by Celgene shareholders). Tax 
considerations were also relevant to Amgen, the Commission's 
approved buyer of a divested asset. Amgen publicly disclosed that it 
would recognize $2.2 billion in tax benefits, on a present value 
basis. See Michael Erman & Manas Mishra, Amgen to buy Celgene 
psoriasis drug Otezla for $13.4 billion, Reuters (Aug. 26, 2019), 
https://www.reuters.com/article/us-bristol-myers-divestiture-amgen/amgen-to-buy-celgene-psoriasis-drug-otezla-for-13-4-billion-idUSKCN1VG102.
    \7\ For example, I noted with great interest that two-thirds of 
Bristol-Myers Squibb's 100 largest shareholders also have stakes in 
Celgene, according to data assembled by Refinitiv. See, e.g., Svea 
Herbst-Bayliss & Michael Erman, Starboard joins opposition to 
Bristol-Myers' $74 billion Celgene deal, Reuters (Feb. 28, 2019, 
6:59 a.m.), https://www.reuters.com/article/us-celgene-m-a-bristol-myers-wellington/starboard-joins-opposition-to-bristol-myers-74-billion-celgene-deal-idUSKCN1QH1K7.
    \8\ For example, last year, the Food & Drug Administration 
published a list of drug makers that were the subject of complaints 
that they had restricted generic drug companies from accessing drug 
samples, which enable generic firms to develop viable alternatives. 
Celgene was a top recipient of these complaints. Alison Kodjak, How 
a Drugmaker Gamed The System To Keep Generic Competition Away, NPR 
(May 17, 2018; 5:00 a.m.), https://www.npr.org/sections/health-shots/2018/05/17/571986468/how-a-drugmaker-gamed-the-system-to-keep-generic-competition-away.
---------------------------------------------------------------------------

    Again, with a few exceptions,\9\ many FTC Commissioners have 
primarily scrutinized pharmaceutical mergers based on an examination of 
whether there are any product overlaps between the merging 
corporations, or where there may be clear-cut incentives to foreclose 
rivals with the ability to compete.\10\ When there are no obvious 
overlaps or foreclosure possibilities, the Commission typically does 
not challenge any aspect of the transaction.\11\
---------------------------------------------------------------------------

    \9\ See, e.g., Statement of the Federal Trade Commission, In the 
Matter of Teva Pharmaceuticals Industries Ltd. and Allergan plc 
(July 27, 2016), https://www.ftc.gov/public-statements/2016/07/statement-federal-trade-commission-matter-teva-pharmaceuticals-industries; cf. Concurring Statement of Commissioner J. Thomas 
Rosch, Federal Trade Commission v. Ovation Pharmaceuticals, Inc. 
(Dec. 16, 2008), https://www.ftc.gov/public-statements/2008/12/concurring-statement-commissioner-j-thomas-rosch-federal-trade-commission.
    \10\ In this matter, the Analysis of Agreement Containing 
Consent Orders to Aid Public Comment focuses primarily on a specific 
product market overlap. This is similar to many past analyses 
contained in public notices seeking comment on proposed consent 
orders in the FTC's pharmaceutical merger actions. See, e.g., 
Analysis Of Agreement Containing Consent Orders To Aid Public 
Comment, In the Matter of Boston Scientific Corporation, File No. 
191-0039, https://www.ftc.gov/system/files/documents/cases/191_0039_boston_scientific_aapc.pdf; Analysis Of Agreement 
Containing Consent Orders To Aid Public Comment, In the Matter of 
Amneal Holdings, LLC, Amneal Pharmaceuticals LLC, Impax 
Laboratories, Inc., and Impax Laboratories, LLC, File No. 181-0017, 
https://www.ftc.gov/system/files/documents/cases/1810017_amneal_impax_analysis_4-27-18.pdf. See also Markus Meier et 
al., Fed. Trade Comm'n, Overview of FTC Actions In Pharmaceutical 
Products and Distribution (2019), https://www.ftc.gov/system/files/attachments/competition-policy-guidance/overview_pharma_june_2019.pdf.
    \11\ For example, in January 2015 the Commission granted early 
termination of the Hart-Scott-Rodino waiting period and took no 
enforcement action against the proposed $66 billion merger between 
Actavis plc and Allergan, Inc. See Fed. Trade Comm'n, Early 
Termination Notices, 20150313: Actavis plc; Allergan, Inc. (Jan. 9, 
2015), https://www.ftc.gov/enforcement/premerger-notification-program/early-termination-notices/20150313.
---------------------------------------------------------------------------

    I am deeply skeptical that this approach can unearth the complete 
set of harms to patients and innovation, based on the history of 
anticompetitive conduct of the firms seeking to merge and the 
characteristics of today's pharmaceutical industry when it comes to 
innovation. Will the merger facilitate a capital structure that 
magnifies incentives to engage in anticompetitive conduct or abuse of 
intellectual property? Will the merger deter formation of biotechnology 
firms that fuel much of the industry's innovation? How can we know the 
effects on competition if we do not rigorously study or investigate 
these and other critical questions? Given our approach, I am not 
confident that the Commission has sufficient information to determine 
the full scope of potential harms to competition of this massive 
merger.

Conclusion

    The financial crisis and the Great Recession taught our country a 
tough lesson: When watchdogs wear blindfolds or fail to evolve with the 
marketplace, millions of American families can suffer the consequences. 
The regulators and enforcers of the mortgage industry failed to stop 
the widespread abuses that plagued the marketplace. And there are many 
more examples every year, from the opioid crisis to the failures of the 
Boeing 737 Max, where blindfolded regulators and the absence of 
rigorous investigation proved to be catastrophic to human life, despite 
so many warning signs.
    When enforcers conduct wide-ranging, intensive inquiries that do 
not uncover unlawful conduct, then, of course, they cannot take action. 
However, when they wear blindfolds or cling to the status quo, they 
cannot assume that the public is protected.
    For these reasons, I respectfully dissent.

[FR Doc. 2019-26074 Filed 12-2-19; 8:45 am]
 BILLING CODE 6750-01-P