WHOLESALE DRUG MERGERS: FTC May Block Two Major Deals
Two proposed mergers "that would reshape the $80 billion wholesale drug industry" are facing "a likely federal challenge on antitrust grounds," today's Wall Street Journal reports. Both mergers, a proposed $1.79 billion buyout of AmeriSource Health Corp. by San Francisco-based McKesson Corp. and a $2.62 billion merger of Ohio-based Cardinal Health Inc. and Bergen Brunswig Corp., were announced late last summer. A five-member panel of the Federal Trade Commission examining the proposed deals found that, if allowed to proceed, the combined entities would "create two drug wholesalers with 70% of the market, dwarfing any competition." The Journal reports that lawyers and others close to the case say "agency staff are recommending that both be challenged."
With Bated Breath
The FTC panel has heard arguments both for and against the proposed mergers. "[L]arge customers" of the companies, in favor of the deal, said it would lead to lower costs. McKesson spokesperson Larry Kurtz called his company's proposed takeover of AmeriSource "pro-competitive," citing a "track record in this industry that consolidation has led to reduced costs." He said his company "has a plan to cut $120 million in costs in the merger with AmeriSource and has told regulators that the deal 'on balance, will help reduce costs in the health care system overall, and we know of no reason it should not be approved.'" Smaller customers, such as independent pharmacies, and competitors "said they feared the size and clout of the combinations." The FTC has not "yet voted on the two deals and could still allow them to go ahead, or impose conditions intended to protect competition." Although a spokesperson yesterday declined to comment, "a vote by the [FTC] board is expected shortly, perhaps within a week" (Wilke, 2/24).