The FTC approves Amgen’s $28B purchase of Horizon.
Retained by Cravath, Swaine, & Moore
The Federal Trade Commission (FTC) filed a lawsuit seeking to block Amgen Inc. (Amgen)’s proposed $28 billion acquisition of Horizon Therapeutics plc (Horizon). The FTC alleged that the acquisition would enable Amgen to leverage its top-selling drugs to foreclose potential future rivals to Horizon’s two rare-disease drugs by offering bundled rebates to payers and pharmacy benefit managers.
Counsel for Amgen retained Darius Lakdawalla of the University of Southern California to analyze the FTC’s claims and assess the analyses of the FTC’s experts. Professor Lakdawalla described the nature of price competition in the pharmaceutical industry and assessed Amgen’s ability and incentives to engage in the alleged leveraging behavior.
Professor Lakdawalla explained that rebates are a common form of price competition in the pharmaceutical industry. He opined that both single-product and bundled rebates reduce the cost of branded pharmaceutical products and improve patient access to the rebated products.
Professor Lakdawalla also showed that Amgen would have neither the ability nor the incentive to use the alleged bundled rebates to foreclose potential future rivals to Horizon’s two rare-disease drugs. This was due to a variety of factors, including the types of drugs involved in the alleged bundle, manufacturer incentives under common reimbursement practices, the nature of drug development, and the cost structure of drug manufacturing and distribution. Professor Lakdawalla further demonstrated that under the FTC’s expert’s empirical model of foreclosure and accepting its assumptions, there was no acquisition-specific harm.
Following the submission of the merging parties’ expert reports, the FTC and Amgen reached an agreement for the acquisition to proceed.
