Hoffman: FTC won't accept pipeline divestitures in certain mergers

05 February 2018

Hoffman: FTC won't accept pipeline divestitures in certain mergers

Freedom Film

The Federal Trade Commission will no longer accept divestitures of pipeline products to remedy anticompetitive mergers in the inhalant and injectable drug industries, the acting director of the agency’s bureau of competition has said. Charles McConnell at GCR Live Miami

Citing the FTC’s review of past merger remedies, Bruce Hoffman said the commission has found that divestitures were not working well in those complex pharmaceutical markets. He delivered the lunchtime keynote speech at GCR Live 7th Annual Antitrust Law Leaders Forum on Friday.

He noted that in the inhalant and injectable drug market, often one company in a proposed merger is already selling a product while the other company is developing an overlapping product. 

Hoffman said that in cases where a pipeline product was divested in these sectors, the rate of failure was “startlingly high” when juxtaposed with the commision’s “overall ‘pretty good’ rate of merger remedies succeeding.” 

“As a result, we are not accepting divestitures of pipeline products in this situation anymore,” Hoffman said.

“If you’ve got a product that’s being manufactured – particularly a contract manufacturer situation, which is common in this industry – and then you have a product that’s in the pipeline; we’re going to want the manufactured product divested. We are not going to take the pipeline product.”

Hoffman went on to say that the commission has heard an argument against this – that forcing the merging parties to divest the pipeline product puts the risk of the divestitures succeeding on those companies, but Hoffman said “that is where the risk belongs.”

“Our view is that when you’re looking at remedies, you’re remedying an anticompetitive transaction… and the risk of failure belongs on the parties, not on the public,” Hoffman insisted, saying that is what is driving the commission’s thinking on the issue.

In follow-up comments to GCR, he explained that the concern may arise specifically in the inhalable and injectable pharmaceutical market due to the difficulty of actually getting such products to market. A company can formulate the drug, but then struggle to have a factory capable of producing it reliably, Hoffman said.

GCR Live Miami concluded on Saturday.