DRUG WHOLESALERS: FTC Releases Findings On Mergers
The Federal Trade Commission released court documents Tuesday that detail its case against the merger of four top drug wholesalers trying to combine into two companies. On Monday, the FTC formally asked a federal judge to block the mergers because the merging companies -- Cardinal Health Inc., Bergen Brunswig Corp., McKesson Corp., and AmeriSource Corp. -- would represent 80% of the market and likely raise prices. The Bloomberg News/Los Angeles Times reports that according to the FTC, "the wholesalers had so many distribution centers that they were forced to cut prices to keep moving products off their shelves." Merging would allow them to consolidate their warehouses and "remove their incentives to cut price." The companies responded that previous industry consolidation has allowed for price cuts due to greater efficiency. Further, "drug purchasers have a bevy of other options for buying drugs." This fact, the wholesalers say, "would prevent them from raising prices after the combinations" (3/11).
Going Down Swinging
USA Today confirmed speculation that the companies intend to contest the FTC ruling in court. "McKesson and AmeriSource Tuesday extended their response deadline to next Wednesday in a filing with the Securities and Exchange Commission, suggesting they are waiting for Cardinal and Bergen to make the first move." The four firms are expected to share information once formal suits are filed. Columbia University antitrust specialist Harvey Goldschmid said, "They can fight, but the question is whether the companies can win. The key is whether concentration levels are simply too high and overwhelm any claims to inefficiencies" (Valdmanis, 3/11).