The Federal Trade Commission scored its first victory earlier this week in its crusade to block deals with pharmaceutical companies: Sanofi (SNY) Monday ended its $735 million budget license agreement with Maze Therapeutics.
It’s a victory for FTC Chairwoman Lina Khan, who is starting to make good on her threats. to take a closer look at small transactions — which is necessary, believes the agency, to slow the growth of monopolies in the pharmaceutical sector.
But this victory was more than an attempt to block Sanofi’s ability to expand in the market. Pompe disease therapy market. The failed deal is the latest example of how the pharmaceutical industry is fighting the U.S. government on multiple fronts, including the White House’s decision. authorize medications which were developed through federal funding, FTC scrutiny of agreements, and Medicare drug price negotiations.
The White House
The Biden administration’s announcement to authorize the drugs is an attempt to reduce the cost of certain medications in the United States.
The “entrance fees”, as they are called, established by the Bayh-Dole law of 1980, allows the government exercise intellectual property rights over patents developed with the use of federal funds or by the government. The most recent example of using such government research in a commercial product is the NIH work that ultimately led to Moderna (mRNA) COVID-19 vaccine – that Moderna finally paid the government the rights forafter losing a legal battle.
Robin Feldman, professor and director of the Center for Innovation at UC Law San Francisco, said “the government is flexing muscles it has rarely flexed in the past.”
Michael Carrier, a professor at Rutgers Law School, said that if the government were able to intervene: “It’s a shot that would be heard around the world.” The United States is perhaps the country in the world where the pharmaceutical industry is most concerned about protecting its intellectual property rights; in many cases, it’s the largest market.”
A major cause for concern: this is the first time that the government has used the increase in the price of medicines as a pretext to trigger entry fees. This is a significant change from the position of previous administrations.
And as expected, the industry’s professional group, PhRMAis not happy.
“If government bureaucrats are allowed to remove patent protection at any time, there will be no incentive for biopharmaceutical manufacturers to collaborate with government or universities, returning us to the pre-Bayh-Dole era, where “Promising new technologies were sitting on the shelves and not benefiting anyone,” the organization said in a statement.
But overall, the White House announcement was good news.
Shortly after a request for comment from Yahoo Finance, World Health Organization Director-General Tedros Adhanom Ghebreyesus. posted on that he welcomed this announcement and that governments should use all legal tools to promote wider access to medicines.
FTC Scrutiny
The FTC’s record on pharmaceutical settlements is not great. He had already tried, without success, to block that of Amgen (AMGN) Acquisition of Horizon Therapeutics for $28 billion. He asked for more details and took a closer look at Pfizer’s results (PFE) Acquired Seagen for $43 billion, ultimately allowing the deal to come to fruition. (Pfizer received approval this week and will close the deal on Thursday.)
“At the end of the day, (Khan) loses all this business. They’re not actually doing something that changes the nature of the industry,” said Craig Garthwaite, director of health care at the Kellogg School of Management. Northwestern University.
The FTC, however, sees things differently and considers the Amgen case a victory.
“The FTC’s settlement of the Amgen Horizon deal includes extensive and binding agreements on all of the concerns we raised in the complaint we filed in court. This settlement is a legal victory for the FTC, but a victory even greater for Americans who need access to affordable medicines,” FTC spokesperson Douglas Farrar said in a statement to Yahoo Finance.
And the end of the Sanofi/Maze deal validates the FTC’s strategy: emphasizing the acquisition of smaller, early-stage companies by big pharma – a long-standing growth strategy in the industry.
Small businesses are agile and can conduct preliminary research that is not weighed down by the bureaucracy of a large company. These companies offer large companies the opportunity to strengthen their pipelines. Pfizer, for example, has acquired three companies in the past yearincluding Seagen, to help cover an expected $17 billion loss from patent expirations by 2030.
Critics say such deals show that big pharmaceutical companies don’t do much R&D and therefore shouldn’t charge high prices on drugs.
But, Garthwaite said: “The infrastructure required to move a drug from phase 2 to phase 3…to manage the clinical trial well…is an exceptionally expensive fixed cost structure. We don’t want 40 companies spending this money. “
Health Insurance
Medicare officials have targeted 10 drugs for which they will begin price negotiations in the coming year. There are already concerns about the impact on financial results.
Analysts were largely unsurprised by the first targeted drugs – as evidenced by absence of stock movement on the day of the announcement. The industry is waiting to enter negotiations and investors are waiting to see what price cut the government will eventually demand.
The companies have fended off nearly a dozen lawsuits, stating that the process is unconstitutional.
In response to drug price negotiations, the companies have already said they are reconsidering deals that could put them on the target list and anticipating which blockbusters might make it onto future lists.
For example, Novo Nordisk (NVO), which surprisingly ended up on the list for one of its insulin products, is also evaluating the potential if its weight loss and diabetes drugs, Wegovy and Ozempic, end up becoming a target for Medicare.
Following?
UC Law’s Feldman says all these government actions “send a message to the pharmaceutical industry: Get your house in order, or we’ll make things very difficult for you.”
But the chances of long-term success on all three fronts are not great, experts told Yahoo Finance.
Garthwaite said policymakers were being shortsighted in their efforts and called the Biden administration’s efforts “crass.”
“The real lack of access is if the product doesn’t exist. It’s, in a way, a luxury to be able to debate the current price of a product,” he said.
Rutgers’ Carrier and James Love, director of Knowledge Ecology International and an expert on intellectual property rights, caution that these efforts may not have the desired impact.
“It looks like a three-front war that they could lose spectacularly. But I would just focus on the modest nature of these (efforts),” Carrier said.
Furthermore, the Biden administration’s strategies could easily be terminated by future administrations.
But ultimately, it’s the justice system that will decide who wins. Feldman, of UC Law, predicts that the patent battle, like the Medicare lawsuits, could turn into a broader legal battle.
“If (the U.S. government) does indeed decide to pull a punch, I would expect the case to go to the Supreme Court,” she said.
Updated with a statement from the FTC.
Anjalee Khemlani is a senior health reporter at Yahoo Finance, covering all things pharmaceutical, insurance, healthcare, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
