FTC’s merger play

Presented by PhRMA: Delivered daily by 10 a.m., Pulse examines the latest news in health care politics and policy.
Oct 22, 2024 View in browser
 
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By Carmen Paun

Presented by 

PhRMA

With Ben Leonard

Driving The Day

Lina Khan, Chair of the Federal Trade Commission

FTC Chair Lina Khan is spearheading new rules that require companies to share more details about mergers. | Kevin Dietsch/Getty Images

MERGER BURDEN SHIFT? The Federal Trade Commission recently finalized new rules that expand requirements for companies across sectors to notify the agency and the Justice Department of significant mergers in a move that could have a considerable impact on health care companies, Ben reports.

When they go into effect in mid-January, the rules seek to dramatically increase the information companies must provide about mergers. They’ll apply to hospitals, pharmaceutical companies, tech firms and providers in deals over a certain financial threshold.

Transparency vs. innovation: The rules are a game-changer that supporters say will require companies to be more transparent and take the burden off regulators in trying to prevent illegal mergers and acquisitions. Opponents argue they’ll stifle innovation.

Companies will have to disclose the reasoning behind the transactions and any product overlaps or vertical ties, including providing additional documentation about transactions or face potential civil penalties. Vertical mergers occur between companies at different levels of supply chains.

“It front-loads a lot more work than we’ve had in the past,” Jon Dubrow, partner at McDermott Will and Emery, said, which will make it easier for regulators to detect vertical relationships. “Between the merger guidelines that came out at the end of last year and these new rules, there is a very strong finger on potential or emerging competition.”

Heightened scrutiny: The FTC and the DOJ signaled a more aggressive stance last year in their merger guidelines, which the pharmaceutical industry took issue with. The moves are part of a heightened enforcement posture from FTC Chair Lina Khan, who has scrutinized consolidation in the sector.

The FTC said the changes would help ascertain which deals warrant antitrust investigation.

“This rulemaking is a much-needed update to address changes in the marketplace that have undermined the agencies’ ability to detect and prevent illegal mergers,” said Shaoul Sussman, associate director for litigation at the FTC’s Bureau of Competition.

The support: The American Economic Liberties Project, an advocacy group that tries to counter concentrated corporate power, said the move will help shift the burden to merging companies instead of “underfunded, under-resourced antitrust agencies.”

“The decades-long underenforcement of federal antitrust laws has resulted in excessive corporate consolidation, giving corporations free rein to wield monopoly power,” the group said in a paper.

The skepticism: The Partnership for the U.S. Life Science Ecosystem, which includes pharmaceutical and life sciences companies — some of which have faced antitrust scrutiny — said the rule could undermine competition that drives biopharmaceutical breakthroughs.

“Those bearing the brunt of these new restrictions are small, early-stage companies in the U.S. which not only make up the vast majority — more than 85 percent — of the world’s biopharmaceutical companies, but which also frequently operate without a profit,” the group said in a statement.

The American Hospital Association also hammered the rules, calling them “flawed and pointless.”

“It functions as little more than a tax on mergers,” AHA general counsel Chad Golder said in a statement. “The agency already has more than enough information about hospital transactions, and it has shown no hesitation in challenging them.”

WELCOME TO TUESDAY PULSE. I’m Carmen Paun, POLITICO’s global health reporter, filling in for Ben and Chelsea.

Who thought that caffeine, which pregnant women are advised to stay away from, could help prevent cerebral palsy if given to the expectant mother and the newborn?

Send your tips, scoops and feedback to cpaun@politico.com and follow along at @carmenpaun. And don’t forget to send your ideas to our regular Pulse hosts at bleonard@politico.com and ccirruzzo@politico.com, and follow them @_BenLeonard_ and @ChelseaCirruzzo.

 

A message from PhRMA:

Drug price “negotiations?” Higher costs and less access to medicines are not what seniors were promised when the Inflation Reduction Act (IRA) was signed into law. Learn more about the IRA’s unintended consequences.

 
Global Health

The logo of Sanofi seen on a building.

French authorities could impose financial penalties on a potential U.S. takeover of Sanofi's over-the-counter drug subsidiary. | Michel Euler/AP

FRANCE THREATENS FINES — An American private equity firm planning to buy a stake in a French producer of over-the-counter drugs like acetaminophen would face fines if it moves jobs and production out of France, POLITICO’s Giorgio Leali reports.

The New York City-based firm, CD&R, is attempting to acquire control of Sanofi subsidiary Opella. Sanofi said it was selling the company as part of its effort to focus on vaccines and innovative drugs. The French pharma giant announced Monday that it had entered exclusive talks with CD&R for the firm to buy 50 percent of Opella’s shares for around €16 billion ($17.3 billion).

Why it matters: News of the potential deal sparked widespread criticism across France’s political spectrum when talks were announced earlier this month, with politicians warning it could threaten manufacturing jobs in France and fall afoul of Europe’s push to secure its supply chains for critical medicines after the struggle to secure them in the early days of the pandemic.

The French government responded to the backlash against the deal by warning against offshoring jobs and production, but Paris is keen on the takeover. On Sunday, the government announced the various stakeholders had sealed an agreement requiring Opella to keep production, jobs and management in France after the American takeover.

Under the deal signed by Sanofi, CD&R and the government, Opella must pay a €40 million ($43.3 million) penalty if it stops production in two of its factories that produce popular medicines like paracetamol and drugs to treat allergy and digestion problems.

Workers at the two factories have been on strike since news of the American takeover broke, as they feared for their jobs. Under the deal, Opella will have to pay a €100,000 ($108,200) penalty for every single economic-related layoff.

IN THE STATES

NO MARIJUANA BALLOT — Votes for a medical marijuana expansion initiative in Arkansas won’t be counted after the state Supreme Court ruled against the campaign, POLITICO’s Mona Zhang reports.

In a 4-3 decision Monday, the court ruled that the name and ballot title — Medical Marijuana Amendment of 2024 — of the measure are misleading, siding with Protect Arkansas Kids, a ballot committee that opposes the medical cannabis initiative, which intervened in the case.

The initiative includes a provision that would allow Arkansans to possess up to one ounce of marijuana for any purpose if the federal government decriminalizes cannabis.

Because this provision would allow possession of marijuana for any purpose if the federal government eliminated criminal penalties for cannabis possession, the popular name and ballot title of the initiative are misleading, as they focus on medical marijuana, Protect Arkansas Kids argued.

What’s next: Arkansans for Patient Access, the committee behind the ballot initiative, vowed to continue fighting to expand medical cannabis access in the state. “This is a setback for the growth and improvement of our existing program, but it will not be the last attempt to ease the barriers Arkansas’s medical patients encounter.”

THE GOLDEN STATE SODA TAX WAR — Santa Cruz’s residents will vote next month on whether a two-cent-per-bottle tax should be imposed on sugary drinks, POLITICO’s Will McCarty reports.

Measure Z, if it passes, would defy a state ban on all new soda taxes until 2031, which passed the Sacramento legislature in 2018. The measure is specifically crafted to provoke a lawsuit over the ban’s constitutionality.

“This is like taking on the oil companies,” Mayor Fred Keeley, a Democrat who previously served in the state assembly, said of the soda fight. “We did this with our eyes wide open. The industry isn’t even pretending that they’re not going to sue over this.”

The American Beverage Association, which defends the interests of the soda industry, has employed D.C.-based political consulting firm Dewey Square to lead operations in Santa Cruz. They’ve won endorsements from Teamsters and United Food and Commercial Workers Union locals and saturated Santa Cruz neighborhoods with flyers and pamphlets.

The campaign against the measure argues the soda tax would disproportionately hurt minority consumers and small businesses and cost the city an enormous amount of money to defend in court.

Industry voices point out that consumer shifts have already led to a dramatic decrease in the consumption of sugary beverages, even as the obesity and diabetes epidemics have grown, and that no-sugar drinks and flavored water now take up half the grocery store aisle.

 

A message from PhRMA:

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Names in the News

CMS Administrator Chiquita Brooks-LaSure and National Institute of Allergy and Infectious Diseases Director Jeanne Marrazzo have been elected members of the National Academy of Medicine.

Other new members include Jennifer Nuzzo, director of the Pandemic Center at Brown University School of Public Health, and Dr. Jarbas Barbosa da Silva Jr., director of the Pan American Health Organization.

WHAT WE'RE READING

The Washington Post reports how Idaho’s parental consent law has snagged a pregnant teen’s care.

Vanity Fair reports on the “bungled bird flu response, where profits collide with public health.”

Health Policy Watch reports on how Rwanda’s high level of critical care has ensured a low fatality rate in the Marburg virus disease outbreak.

 

A message from PhRMA:

Seniors are feeling the true cost of drug price “negotiations.”

Instead of saving money, some Medicare patients will pay more for medicines.

Others may not be able to get their medicines – 89% of insurers and PBMs say they plan to reduce access to medicines in Medicare Part D because of the Inflation Reduction Act.

Higher costs and less access. That’s not what seniors were promised.

Learn more.

 
 

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