Antitrust Lawyer Blog Commentary on Current Developments

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Last month’s meeting between Attorney General Jeff Sessions and several state attorneys generals reminds us that sound antitrust enforcement is not just a federal affair.  Indeed, many of the seminal antitrust cases including cases creating key principles of monopolization and merger law were brought by state attorneys generals.  State attorneys generals have used the power to protect consumers against anticompetitive and fraudulent conduct in credit card, pharmaceutical, computer and many other markets crucial to consumers.

States have significant advantages over federal enforcers.  They are closer to the market and recognize the direct harm to consumers.  They have the ability to secure monetary damages.  States are often customers and victims of anticompetitive schemes.  State enforcers can bring combined antitrust and consumer protection cases.  And although each state has limited antitrust and consumer protection resources, states increasingly are using multi-state task forces to investigated and prosecute unlawful conduct.

The strategic advantages of State Attorneys Generals are substantial. They have the authority to investigate and challenge mergers as well as the practices of PBMs under various federal and state laws including the False Claims Act (most states have enacted analogous false claims acts), state law deceptive trade practices acts, and the antitrust laws.

On Friday, September 14th, a Congressional briefing was held regarding the renegotiation of NAFTA and how certain changes under discussion could end up undermining the President’s Blueprint to lower drug prices in the United States by extending pharma monopolies.  One of the provisions under discussion would increase brand-name drug exclusivity.  Imposing additional brand-name drug exclusivity only keeps already high brand drug prices out of reach for patients for longer.

The panelists included representatives from Association for Accessible Medicines (Jeff Francer), Mylan (Marcie McClintic Coates), Patients for Affordable Drugs (David Mitchell), and AARP (Leigh Purvis).  Watch the briefing here:  https://www.youtube.com/watch?v=9K3RQHB-oTE

They explained how one of most promising areas of drug research is the creation of generic biologic medicines, or biosimilars.  These drugs have great potential and often offer the best treatments for serious diseases such as cancer, multiple sclerosis, rheumatoid arthritis, and others.  Yet, today, there are only four biosimilars on the market in the United States.

On August 10, 2018, the Eastern District of Pennsylvania denied J&J’s motion to dismiss Pfizer’s antitrust action involving infliximab products.

Background on Pfizer/J&J

In September 2017, Pfizer filed an antitrust lawsuit under Sections 1 and 2 of Sherman Act alleging J&J engaged in exclusionary anticompetitive practices to keep Pfizer out of the market for infliximab products.

On June 27, 2108, the Department of Justice’s Antitrust Division announced that The Walt Disney Company (“Disney”) agreed to divest 22 regional sports networks (“RSNs”) to resolve antitrust concerns with its approximately $71 billion acquisition of certain assets from Twenty First Century Fox (“21CF”).

Speedy Antitrust Approval

DOJ’s announcement of the settlement agreement is noteworthy because of the speed at which Disney was able to negotiate a remedy to a combination that raised a number of antitrust issues.  Though the parties received second requests on March 5, 2018, and Disney had only recently entered into a new agreement with 21CF on June 20, 2018, the DOJ and Disney were able to negotiate a divestiture worth approximately $20-23 billion within 6 months of review and 4 months after issuing information requests.  The dollar value of the Disney/21CF divestiture will likely double what the DOJ characterized as the largest divestiture in history in Bayer/Monsanto.

While there is much discussion about controlling prescription drug prices, the undeniable trend in the generic drug industry is that prices have been trending down for the past several years.

Generic Prices are Down, But Is that a Good Thing?

The short term effects appear good for the consumer, but the longer term effects could result in higher prices and drug shortages.  Today, 90% of U.S. prescriptions are for generic drugs not branded drugs, but in 2017, generics made up only 13% of all prescription spending.  Over the past several years, branded drug prices have been going up while generic drug prices have been going down.  Prices are so low that some generics are deciding to exit, stop producing and marketing certain drugs that are no longer profitable. If they exit, where will consumers get basic antibiotics and drugs that are no longer sold by the branded firms?

On February 21, 2018, Judge Leon ruled against AT&T Inc.’s (“AT&T”) ability to discover evidence that would support its selective enforcement defense.

Background

On November 21, 2017, the U.S. Department of Justice’s (“DOJ”) Antitrust Division filed a complaint in federal court block AT&T’s acquisition of Time Warner Inc. (“Time Warner”).

On February 12, 2018, the Federal Trade Commission (“FTC”) filed an administrative complaint against Benco, Henry Schein, and Patterson, the three largest national full service dental supply distributors in the United States for allegedly conspiring to refuse to provide discounts to or otherwise serve buying groups representing dentists and against Benco for inviting a fourth competing distributor to take part in the illegal conspiracy.  As is typical with FTC conduct cases, the complaint was brought under Section 5 of the FTC Act.

The FTC alleges that three distributors agreed to boycott buying groups, which sought discounts and lower prices for dental supplies and equipment on behalf of solo and small-group dental practices.  The FTC further alleges that the agreement deprived solo and small-group dental practices from the benefits of participating in buying groups.

Benco and Henry Schein allegedly entered into an agreement whereby both distributors would refuse to provide discounts to or compete for the business of buying groups.  The complaint details email, phone, and text communications between executives of the two companies evidencing the agreement, as well as attempts to monitor and ensure compliance with the agreement.  On Oct. 1, 2013, a Benco executive called his counterpart at Henry Schein and “reaffirmed Benco’s commitment against buying groups.” After the call, neither distributor bid on a buying group contract.  The FTC’s complaint also alleges that Patterson joined the illegal agreement.

Antitrust enforcement has become front and center in the American political economic debate.  The Democratic Platform included a plank for greater antitrust enforcement for the first time since 1968.  There is increasing evidence that large mega-mergers have cost consumers dearly in the pocket book, increased economic inequality and dampened economic opportunity.  In a recent speech Senator Elizabeth Warren highlighted the perils to industries in which companies have grown so large and markets become so concentrated that monopolists can crush their competitors and lock out new entrants.

The beer industry readily falls into this category, with the United States market dominated by two players, Anheuser-Busch InBev (ABI), and MillerCoors, a joint venture between South African controlled SABMiller and Molson Coors.  The pending merger between ABI the largest global beer company, and SABMiller, the second largest global beer company, will truly leave ABI in a position in which it can crush its competitors and stifle new entry.  The Justice Department has been examining the merger but only tough comprehensive action by DOJ can prevent the significant threat of Brazilian owned ABI becoming the kingpin of the market.

Using the best lawyers, economists and lobbyists money can buy, ABI has tried to engage in a slight of hand with Congress and the DOJ.  It claims that there are simply no competitive issues from this merger because it plans to divest all of SABMiller’s U.S. operations, which are held by the MillerCoors joint venture, to Molson Coors. And, while that may appear to be correct at first glance, one doesn’t have to dig too deep to pierce this façade and see major competitive problems looming in the future for the beer industry.

Andre P. Barlow
Few missions are as important to the U.S. Department of Justice’s Antitrust Division as preventing anti-competitive mergers or permitting them with adequate conditions to prevent competitive harm. After all, a merger is forever — fixing it after the fact is too messy.

The DOJ is currently investigating Anheuser-Busch InBev SA/NV’s (“ABI”) acquisition of SABMiller PLC, the largest beer merger in history, as well as its proposed divestiture of SABMiller’s interest in the MillerCoors LLC Joint Venture to Molson Coors Brewing Company. These proposed transactions lock in place the two largest beer competitors in the United States while fundamentally changing the dynamics in the beer industry for smaller brewers, distributors, wholesalers and retailers. While ABI maintains that the proposed transactions do not change the competitive landscape, the DOJ knows better.

Indeed, the DOJ’s recent approach in approving Charter Communications Inc.’s acquisition of Time Warner Cable Inc. (“TWC”) and its related acquisition of Bright House Networks LLC to create New Charter, the merged firm, is instructive. Despite no geographic overlap in any local market, the DOJ required comprehensive behavioral conditions to prevent New Charter from engaging in future anti-competitive conduct against its smaller rivals. The DOJ should take the same tough and sophisticated approach to protecting consumers from the much larger ABI/SABMiller merger and the new ownership by Molson Coors, which will create two beer giants that will dwarf its rivals.

On April 25, 2016, the DOJ entered into settlement agreement approving Charter Communications, Inc.’s (“Charter”) acquisition of Time Warner Cable Inc. (“TWC”) and its related acquisition of Bright House Networks, LLC to create New Charter as long as the parties agreed to certain behavioral conditions.

DOJ’s Vertical Concerns Related to the Creation of New Charter

New Charter became the second largest cable company and third largest Multichannel Video Programming Distributor (“MVPD”).  MVPDs include cable companies such as Comcast, TWC and Charter, but also direct broadcast satellite providers (i.e., DirectTV and Dish Network) and telephone companies like AT&T and Verizon.

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