American Antitrust Institute Weighs in on Teva Allergan Merger

In a letter to the Federal Trade Commission (FTC), the American Antitrust Institute (AAI) outlined the competitive concerns raised by the proposed merger of generic pharmaceutical makers Teva and Allergan.

teva

The letter evaluates the likely competitive effects of the proposed merger of Teva and Allergen and its implications for consumer welfare.

The letter was written by AAI Advisor Bill Comanor, Professor, Department of Economics, University of California, Santa Barbara and Professor, Department of Health Policy and Management, University of California, Los Angeles, and AAI President Diana Moss

Moss and Comanor say that “potentially adverse effects could be large since generic sellers introduce a critical measure of competition into pharmaceutical markets and play an important competitive role in making prescription drugs affordable.”

Any limitation or diminution of the competitive influence of generic pharmaceutical firms could therefore have substantial adverse consequences, they write. Moreover, crafting relief that will adequately protect consumer interests is inherently difficult.

The proposed merger joins the largest generic pharmaceutical company in the world, Teva Pharmaceuticals, with Allergan, an important rival and currently number three in worldwide generic sales.

Both companies are the product of previous mergers. Teva’s past includes mergers with Copley Pharmaceuticals on December 23, 2008 and Cephalon, Inc. on October 14, 2014.

These mergers contributed to Teva’s current leading position in the generic pharmaceutical industry.

Allergan was largely a branded pharmaceutical company before its merger with Actavis in 2015. Actavis’ position as a generic drug supplier was enhanced by a rapid succession

of earlier mergers.

These include mergers with Watson Pharmaceuticals in October of 2012, Warner

Chilcott in October of 2013, and Forest Labs and Furiex Pharmaceuticals in July of 2014.

Teva has a 12.2 percent market share while Allergan has an 8.9 percent market share.

“If the proposed merger is consummated, the merged firm will control over 21% of the worldwide generic drug business,” Comanor and Moss said.

 

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