FTC: Amgen-Horizon Deal Would Cement Monopoly for Treatment of Two Diseases

Commission pauses major biopharma transaction involving drugs priced in the hundreds of thousands of dollars.

As part of the Federal Trade Commission’s promised campaign to protect competition in the pharmaceutical industry, it has filed suit and secured a temporary delay of Amgen Inc.’s acquisition of Horizon Therapeutics Public Ltd. Co., which the government fears will hinder competition and the innovation of treatments for thyroid eye disease and gout.

Horizon may not have helped itself by pointing out in a filing with the Securities and Exchange Commission that its products for these ailments have little or no competition.

In a press statement about its suit to halt the deal, the FTC said the $27.8 billion transaction “would enable Amgen to use rebates on its existing blockbuster drugs to pressure insurance companies and pharmacy benefit managers (PBMs) into favoring Horizon’s two monopoly products – Tepezza, used to treat thyroid eye disease, and Krystexxa, used to treat chronic refractory gout.” Since “neither of these treatments have any competition,” the Commission says Amgen would have “strong incentives” to raise barriers to entry into these markets or get new competitors not to market aggressively. The company has a history of such conduct, the government maintains.
The FTC says “rampant consolidation” in the industry has led to exorbitant price hikes, denied patients less expensive generic drugs, and decreased innovation. “The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition,” FTC Competition Director Holly Vedova said.

The suit was filed in the Northern District of Illinois on May 16 (FTC v. Amgen and Horizon Therapeutics, No. 23-CV-3052, N.D. Ill., Eastern Div.).


The Diseases

Gout is an especially painful and potentially damaging form of arthritis caused by a buildup of uric acid crystals in the body. According to a December 2021 article in the Journal of the American Medical Association 9.2 million Americans suffer from the ailment.

The American Thyroid Association says thyroid eye disease (TED) is an autoimmune condition that affects some people with autoimmune thyroid disease. It can be severe, with treatments ranging from medication to surgery. Symptoms include light sensitivity and the feeling of sand in the eyes. The Kellogg Eye Center says a million Americans are diagnosed with the condition, which afflicts woman more than men by a factor of at least five. The incidence is approximately 19 in 100,000, says a report from the American Academy of Ophthalmology.


Pharmacy Benefit Managers and Conflicts of Interest

The Commission cited “widespread complaints” about rebates and fees paid by drug manufacturers to pharmacy benefit managers (PBMs) and other intermediaries to favor higher-cost drugs over lower cost drugs. These relationships are fraught with conflicts of interest and incentivize prescriptions of higher costs drugs, harming patients, doctors, health plans, and competition. The FTC is separately examining the business practices of PBMs.

On May 17, the day after the suit was filed, the FTC ordered two purchasing organizations that negotiate drug rebates on behalf of other PBMs to provide information and records to shed light on their business practices. This brings to eight the number of PBMs and related GPOs (group purchasing organizations) which the FTC says are “part of vertically integrated companies and act as middlemen and negotiate rebates and fees with drug manufacturers, create drug formularies (lists of medications that are covered by insurance) and policies, and reimburse pharmacies for patients’ prescriptions.”

The eight PBMs are:

1. Ascent Health Services GPO (formed by Express Scripts PBM in 2019)
2. CVS Caremark (formed Zinc GPO in 2020)
3. Express Scripts, Inc. (owned by Cigna)
4. Humana Pharmacy Solutions, Inc. (owned by Humana health insurance company)
5. MedImpact Healthcare Systems, Inc.
6. OptumRx, Inc. (formed Emisar Pharma Services in 2021)
7. Prime Therapeutics LLC (Blue Cross Blue Shield)
8. Zinc Health Services, LLC (CVS Caremark)

With global sales of nearly $25 billion and 27 approved drugs, Amgen is one of the world’s largest biopharmaceutical companies. Its products include blockbuster treatments for rheumatoid arthritis (etanercept, sold as Enbrel), psoriasis (apremilast, sold as Otezla, and osteoporosis (denosumab, sold as Prolia).

Amgen has built its empire partly through acquisitions. According to Tracxn.com, it has spent more than $73 billion in 24 deals in addition to 49 key investments. Such power gives it leverage with insurers and PBMs that negotiate reimbursement for its products.

The FTC noted Amgen’s strategy of using its market power to gain advantage over rivals. “In particular, the company has engaged in cross-market bundling, which involves conditioning rebates (or offering incremental rebates) on products such as Enbrel in exchange for giving Amgen drugs preferred placement on the insurers’ and PBMs’ lists of covered medications in different product markets. The value of the rebates that Amgen can offer on its high-volume drugs as part of its cross-market bundles may make it difficult, if not impossible, for smaller rivals who are developing drugs to compete against Tepezza and Krystexxa to match the level of rebates that Amgen would be able to offer.”

Amgen expressed its disappointment with the FTC’s action but remains committed to the transaction, saying it “poses no legitimate competitive issues” and will “bring significant benefits to patients suffering from very serious rare diseases in the U.S. and around the world.”

Amgen’s and Horizon’s medicines “generally treat different diseases and patient populations, and there are no overlaps of competitive concern,” Amgen said in a May 16 statement. “The FTC’s claim that Amgen might ‘bundle’ these medicines (offer a multi-product discount) at some point in the future is entirely speculative and does not reflect the real world competitive dynamics behind providing rare-disease medicines to patients. And we committed that we would not bundle the Horizon products raised as issues; however, the Commission still decided to pursue this path. Furthermore, we are unaware of any prior acquisition that has been blocked under a bundling theory.”

Horizon, based in Dublin, Ireland and Deerfield, Illinois, is a global biotechnology company with about $3.6 billion in sale. It focuses on medicines treating rare, autoimmune, and severe inflammatory diseases. Horizon markets and distributes 11 products in the United States. In securities filings, the FTC pointed out, Horizon boasted that Tepezza “has no direct approved competition” and that Krystexxa “faces limited direct competition.” The Commission says this enables Horizon to charge $350,000 for a six-month course of Tepezza and $650,000 for an annual supply of Krystexxa.

The Commission voted 3-0 to authorize its staff to take action.

Sign up to view this Whitepaper