When two merging drugmakers both make certain time-released “complex” drugs, the US Federal Trade Commission believes the established drug, and not the drug in the research and development pipeline, must be divested, the acting director of the FTC’s bureau of competition has said. 

Bruce Hoffman expanded this week on the categories of drugs for which the FTC will expect to sell off while they are in development in order to eliminate overlaps and ease competition concerns during mergers. He spoke on his own behalf both at Dechert on Tuesday and the American Bar Association’s antitrust spring meeting today. 

At PLN’s sister publication Global Competition Review’s Miami conference in February, Hoffman said merging companies “should expect that in transactions where complex pharmaceutical products such as inhalants or injectables need to be divested, we will require the divestiture of contract manufacturing capabilities rather than other assets, such as pipeline products.”

He had said that the FTC is taking this stance “based on a history of problems with divestitures in this area” that indicate “divesting ongoing manufacturing rather than products that haven’t yet come to market places the greater risk of failure on the merging firms, rather than the American public.”

This week, Hoffman added “time release dosage” to the group of “difficult and complex to make” pharmaceuticals for which the FTC has “an extremely strong presumption” that in an overlap, the product already being manufactured rather than the one in development must be divested.

Speaking at the ABA meeting on 13 April, he said, “I don’t want to say this is an absolute ironclad rule and would never be departed from,” as facts drive everything the FTC does.

But he warned that it is “going to be one heck of a longshot to convince us” that the pipeline product rather than the established one should be divested. When a product is already on the market, he said, “the risk of failure is dramatically less” for a divestiture buyer than for a product being developed, which is subject to risks that it might not actually get made.

“In the complex pharmaceutical space, there are all kinds of things that go wrong,” such as obtaining final approvals from the US Food and Drug Administration and having manufacturing plants shut down, Hoffman said.

Last year, a hurricane closed many of the pharmaceutical manufacturing sites in Puerto Rico, causing shortages in the US of products such as intravenous bags of saline. In the 2014 Nexium pay-for-delay trial, a jury found for the defendant because the alleged generic entrant, Ranbaxy, would not have been able to sell the drug even in the absence of the reverse-payment settlement, due to the FDA blocking imports from Ranbaxy’s Indian facilities.

Asked about the application of this policy to the new class of genetics-based health treatments, Hoffman demurred. While there are similarities between genetics and complex pharmaceuticals in certain ways, he said, genetics are sufficiently different that he does not have the data to give a reasonable answer.

For the first time, the FDA last August approved a cancer treatment based solely on a genetic biomarker, rather than on the area of the body in which the cancer originated. 

Hoffman also spoke about how genetic drugs may be assessed generally by the bureau of competition.

“Market definition in pharmaceutical markets is actually quite complex,” he said, based on factors such as the “mechanisms of action and effect, what they treat.”

Genetic drugs that aim to treat a certain health problem are similar to other pharmaceuticals that address the same disease, he said, but the most important question is “what is the degree that products substitute for each other, can operate as constraints on each other” in price, innovation and quality.

“I couldn’t speculate intelligently on how those factors would play out in genetics and how they’re similar to pharmaceuticals,” Hoffman said. “I think it’s a little bit early to say.”