Bristol-Celgene: Congressional Reps Want Assurance Merger Will Not Increase Prices

Reps. Welch and Rooney urge FTC and DOJ to condition their approval of the merger on inclusion of a pricing provision.

The US Federal Trade Commission and Department of Justice should not approve Bristol-Myers Squibb Co.'s proposed acquisition of Celgene Corp. unless Bristol agrees not to raise drug prices to cover the transaction, members of Congress told the agencies.

"Should the FTC and DOJ allow a merger, it should be conditioned on a hold harmless provision assuring that it will not be paid for by consumers, taxpayers, or employers, but by shareholders: the ones who stand to benefit," Reps. Peter Welch, D-Vt., and Francis Rooney, R-Fla., asserted in a Jan. 11 letter to FTC Chairman Joseph Simons and Acting Attorney General Matthew Whitaker.

The call seems to be an effort to draw attention to drug pricing as the FTC has not set pricing terms as a condition of approval of past transactions. Celgene has already faced high-profile scrutiny over its competitive tactics. (See sidebar.)

The proposed $74bn merger of Bristol and Celgene, announced Jan. 3, would be the third largest in biopharma history. It ranks behind Pfizer Inc.'s $84.1bn acquisition of Warner-Lambert Co. and Glaxo Wellcome PLC's $78bn acquisition of SmithKline Beecham, both of which occurred in 2000. (Also see "Bristol/Celgene A Record-Setting Merger, If It Happens" - Pink Sheet, 3 Jan, 2019.)

Simons and Welch, who referred to the merger as the largest ever acquisition in the pharmaceutical industry, said it would diminish competition and reduce patient treatment options by giving Bristol-Myers access to several product lines that either compete with or complement its current cancer drugs, including Abraxane (paclitaxel protein-bound particles for injection suspension), Pomalyst (pomalidomide), and Revlimid (lenalidomide).

In addition, they said the merger would give Bristol added leverage when negotiating placement of its drugs on formularies and what discounts it will provide.

The also asserted that the merger is likely to result in significant increases in Rx drug prices to finance the merger.

"In past mergers, the acquiring company has invariably increased the cost of prescription drugs – those in its portfolio and of the portfolio of the acquired company – to pay for the acquisition itself," they stated.

For example, they said that after Actavis acquired Allergan Inc. in 2015, the merged company raised the price of its drugs four years in a row, most recently by an average of 9.5% on its entire portfolio of 75 drugs. And they said that after Shire PLC acquired Baxalta Inc. it raised the price of its cancer drug Oncaspar (pegaspargase) by $10,000.

Oncology Overlap

The FTC's Bureau of Competition reviews proposed mergers and acquisitions to determine if they will harm consumers. They consider if they are likely to reduce competition and lead to higher prices, lower the quality of goods or services, or result in less innovation. If the agency identifies concerns with a transaction it will request the parties to divest certain assets.

For example, in Merck & Co. Inc.'s $42bn acquisition of Schering-Plough Corp. in 2009, the FTC issued a consent order requiring Merck to divest all of its interest in an animal health products joint venture and Schering to divest all of the assets relating to its NK1 receptor antagonist rolapitant to Opko Health Inc. And in Pfizer's acquisition of Warner-Lambert, Warner had to end its agreement with Forest Laboratories Inc. for co-promotion of its antidepressant Celexa (citalopram) and divest its Alzheimer's disease drug Cognex (tacrine) to First Horizon, and Pfizer had to return its EGFr-tk inhibitor to development partner OSI Pharmaceuticals LLC.

The FTC may require some product divestitures for approval of Bristol's acquisition of Celgene as there is some overlap in their portfolios.

In oncology, Celgene's portfolio skews towards hematologic malignancies while Bristol's skews towards solid tumors. There is an overlap in immune-oncology with the PD-1 inhibitor tislelizumab Celgene licensed from, BioGene Ltd. in 2017. The companies' pipelines also have overlapping interests in inflammatory bowel disease, lupus and other indications across multiple products though with different mechanisms of action. (Also see "Bristol Values Celgene's Hematology, Immunology Portfolio At $74bn, But Does It Price In Risk?" - Scrip, 3 Jan, 2019.)