Markets Wired

Pharmaceutical and biologic manufacturers Bristol-Myers Squibb Company, or BMS, and Celgene Corporation have agreed to divest Celgene’s Otezla, the most popular oral treatment in the United States for moderate-to-severe psoriasis, for $13.4 billion. This divestiture would settle Federal Trade Commission charges that BMS’s proposed $74 billion acquisition of Celgene would violate federal antitrust law. The proposed divestiture is the largest that the FTC or the U.S. Department of Justice has ever required in a merger enforcement matter.

“The Commission has ordered BMS to divest Otezla to preserve BMS’s incentive to continue developing its own oral product for treating moderate-to-severe psoriasis,” said Chairman Joseph J. Simons. “The antitrust laws protect not only competition today, but competition in the future, especially when it comes to the development of new treatments for chronic conditions.”

The FTC alleges that, as proposed, BMS’s acquisition of Celgene would harm consumers in the U.S. market for treatments taken orally for moderate-to-severe psoriasis. BMS has a pipeline product under development that is considered the most advanced oral treatment for moderate-to-severe psoriasis. According to the complaint, BMS’s pipeline product will likely be the next entrant into the market and would compete directly with Otezla.

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.  Several older oral generic drugs are approved by the FDA to treat psoriasis that does not respond to topical medication and light therapy, but most doctors now prescribe treatments that have better efficacy or safety, or less onerous side effects, according to the complaint. While many injectable and infused products are approved to treat moderate-to-severe psoriasis, some patients object to them or find them inconvenient.

The complaint alleges that the acquisition would substantially lessen competition and tend to create a monopoly by eliminating future competition between BMS and Celgene in developing, manufacturing and selling oral products to treat moderate-to-severe psoriasis in the United States. New competitors in this market would face lengthy delays for both drug development and FDA approval. As a result, entry into this market would not be timely, likely, or sufficient to deter the anticompetitive effects of the acquisition.

Under the terms of the proposed consent order, the parties will divest Celgene’s worldwide Otezla business—including its regulatory approvals, intellectual property, contracts, and inventory—to Amgen, Inc. no later than 10 days after consummating the proposed acquisition. Amgen, a California-based pharmaceutical and biologic company, has the expertise, U.S. sales infrastructure, and resources to restore the competition that otherwise would have been lost due to 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 the parties to unwind the sale of Celgene’s worldwide Otezla business to Amgen, and then divest that business to a Commission-approved acquirer within six months of the date the order.

Further details about the consent agreement are set forth in the analysis to aid public comment for this matter. The proposed order allows the Commission to appoint a monitor to ensure that the parties comply with all their obligations under the consent agreement and that the Commission stays informed about the status of the divestiture. Also under the order, the Commission may appoint a trustee in the event that Bristol-Myers Squibb and Celgene fail to divest the products as required.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 3-2, with Commissioners Noah Joshua Phillips and Christine S. Wilson issuing separate statements, and Commissioners Rohit Chopra and Rebecca Kelly Slaughter issuing dissenting statements.  The FTC will publish the consent agreement package in the Federal Register shortly. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $42,530.

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