FTC warns of ‘rampant’ pharma consolidation as it targets $28bn Amgen deal

US regulators have warned that “rampant consolidation” in the pharmaceuticals industry is pushing up prices for patients as the Federal Trade Commission sued to block Amgen’s $28.3bn deal to acquire Horizon Therapeutics.

The lawsuit marks the first time in more than a decade that the US antitrust regulator has sought to block a deal in the pharmaceutical sector. Shares in Horizon, which is based in Ireland, were down nearly 16 per cent on Tuesday morning in New York.

The lawsuit also hit Seagen, which slid more than 5 per cent as investors weighed the possibility of the FTC targeting other deals in the sector. The oncology-focused biotech agreed a $43bn deal to be acquired by Pfizer.

“Rampant consolidation in the pharmaceutical industry has given powerful companies a pass to exorbitantly hike prescription drug prices,” said Holly Vedova, director of the FTC’s competition bureau.

Amgen said it was “disappointed by the FTC’s decision and remains committed to completing this acquisition”. It said it had addressed questions raised by the regulator and proved that the transaction “poses no legitimate competitive issues”.

Amgen and Horizon indicated they would try to complete the deal by fighting the FTC in court. “We firmly believe in the benefits of this acquisition and intend to work with the court on a schedule that would allow the transaction to close by mid-December,” both companies said in separate statements.

FTC chair Lina Khan is among a new cohort of progressive antitrust officials appointed by US president Joe Biden, who have vowed to adopt a tougher stance and crack down on anti-competitive conduct in the US.

When announcing the transaction last year, Amgen had said that Horizon’s pipeline of medicines would “strongly complement” its R&D portfolio. The pipeline includes drugs targeting rare inflammatory and autoimmune diseases as well as Horizon’s blockbuster treatment for thyroid eye disease, Tepezza.

“We understand the FTC and current administration is prepared to continue its more aggressive strategy to deter M&A even if legal merits are not strong as Amgen doesn’t have any overlap or anti-competitive dynamics with Horizon,” said Michael Yee, analyst at Jefferies.

The FTC under Khan and the Department of Justice’s antitrust unit under Jonathan Kanter have aggressively challenged deals they deem to be anti-competitive.

One of the biggest tests for Khan will be the FTC’s bid to block Microsoft’s $75bn acquisition of gaming company Activision Blizzard. The deal was cleared by the EU this week, though the UK has decided to block the transaction.

The antitrust watchdog under Khan has also heightened its scrutiny of the pharmaceutical industry beyond corporate tie-ups. The agency launched an inquiry last June into intermediaries in the prescription drug industry. It required the six largest pharmacy benefit managers, which negotiate fees and rebates with drug manufacturers, to share information on their business practices.

Less than 10 days later, the FTC said it would intensify enforcement against illicit rebate plans or bribes to prescription drug intermediaries that block consumers’ access to low-cost drugs.

Upon announcing the FTC’s tougher enforcement stance, Khan warned that this “should put the entire prescription drug industry on notice: when we see illegal rebate practices that foreclose competition and raise prescription drug costs for families, we won’t hesitate to bring our full authorities to bear”.

Additional reporting by Peter Wells in New York