This audio is automatically generated. feedback.
The proposed transaction between Novo Nordisk and contract manufacturer Catalent Inc. Aggressive Federal Trade Commission.
agency You recently requested additional details From Novo Holdings and Catalent $16.5 billion deal The deal gives Novo 50 manufacturing sites producing small molecules, biologics and cell and gene therapy drugs. Designed to help drug companies meet surging demand for the highly popular GLP-1 agonists Ozempic and Wegovy, Novo will manage three Catalent manufacturing plants in Indiana, Italy and Belgium.
However, the current enforcement environment could pose a significant obstacle to companies’ plans.
“This will be one of the Commission’s top priorities, and rightly so, given the importance of this market. They’ll want to take a tough stance to set a lasting precedent on how anticompetitive these mergers are,” said David Barto, a former deputy director for policy evaluation at the FTC and an antitrust lawyer.
Novo said it is preparing to respond to the FTC’s requests but still expects the deal to go through.
“Novo Nordisk is gathering information and documents in response to a second request, which is not unusual in a transaction of this nature,” the company said in an emailed statement. “Progress is being made on the satisfaction of various customary closing conditions and the acquisition is expected to close by the end of 2024.”
“The potential for anti-competitive conduct here is serious.”
David Barto
Former Deputy Director of Policy Evaluation at the FTC
The FTC isn’t the only one concerned that the partnership could give Novo an unfair competitive advantage in the weight-loss market. $200 billion by 2030When the companies announced the deal, executives at Eli Lilly, which makes competing GLP-1 drugs Mounjaro and Zepbound and also has an investment in the company’s GLP-1 drugs, said: Manufacturing Capabilitiesexpressed concern about the implications.
Lilly also has a manufacturing agreement with Catalent Inc. to make some of its high-demand drugs. Neither Lilly nor Catalent responded to requests for comment.
Novo has publicly pledged to honor its obligations to customers at the facilities it acquires, but that has not allayed regulators’ concerns.
“The potential for anti-competitive conduct here is serious,” Barto said. “By securing contract manufacturing facilities, Novo Nordisk has a strong position that could potentially harm competition in the marketplace. They know what their rivals are making and essentially control key manufacturing companies. And this is particularly important because these manufacturing facilities actually have limited capacity.”
As GLP-1 gains approval for use in areas other than weight loss, diabetes, and cardiovascular therapy, its market share is expected to only grow. mashIt is also being studied for chronic kidney disease and obstructive sleep apnea and may eventually be considered for treatment.
FTC Increases Oversight
Barto said that an FTC investigation into the market impact of such a deal typically takes about six months. The investigation may be part of a larger shift at the FTC as its staff takes a broader view of anticompetitive conduct. In the past, the FTC has not paid much attention to vertical integration.
“Past administrations’ approaches to vertical integration have been very shortsighted. They fundamentally saw vertical integration as promoting competition,” Barto said.
But that is no longer the case, and now that pharmaceutical companies are eager to secure mega-mergers, regulators are stepping up enforcement of vertical mergers.
“Companies can secure market power through vertical arrangements by controlling key raw materials or key distribution channels. That’s how they really consolidate market power, and this is a classic example of that problem,” Barto said.
The FTC may also be less willing to make concessions or compromises than it has in the past.
“Behavioral remedies for vertical mergers have proven time and time again to be not very effective,” Barto said.
Notable examples include The settlement agreement was roundly criticized The Department of Justice’s (DOJ) approval that allowed Live Nation to acquire Ticketmaster in 2010 created a monopoly that allegedly led to inflated ticket prices in the United States. Live Nation is now Antitrust litigation From the Department of Justice.
November Commonwealth The election is approachingThe FTC may also be mindful of what kind of legacy it will leave behind if a new administration takes office.
“This whole issue is a significant achievement for the agencies to strengthen pharmaceutical merger enforcement and to shift the paradigm from this myopic approach to looking at a much broader range of potential anticompetitive content, and that’s very significant,” Barto said.
This deal fits squarely into those priorities: A merger could create bottlenecks that could stifle innovation and the entry of new GLP-1 competitors, Barto said.
“This bottleneck is going to be controlled by the largest market players. It doesn’t seem like a good market to try to improve,” he said.
In its investigation, the FTC will not only consider risks directly related to the transaction, but may also examine whether Novo has engaged in other types of anticompetitive conduct that it has not typically considered in the past.
“The administration’s stance right now is to focus on ongoing anti-competitive conduct,” Barto said. “It’s not just the impact of this merger that’s at issue. Other types of anti-competitive conduct that Novo Nordisk may be engaging in could also be the subject of this investigation. Novo has significantly increased the prices of medicines, so I think that’s going to get a lot of attention.”
