by David Dayen, The Intercept:
One of the biggest policy debates in America today concerns the unparalleled rise in prescription drug costs. Enormous pharmaceutical industry profit margins; tales of companies like Turing, Valeant, and Gilead Sciences jacking up the price of life-saving medicines; and a spate of industry mergers (the latest being a $150 billion deal between Pfizer and Allergan, designed mostly to lower their tax rates) havelawmakers and presidential candidates scrambling for answers.
But one point has been lost among the various proposals: The U.S. has had antitrust laws on the books for over 100 years to reduce the power of monopolies and restrain consumer costs. They could come in handy in situations like these.
Bernie Sanders recognized this when he urged the Obama administration to block the Pfizer-Allergan merger. Hillary Clinton has promised to “stop corporate concentration” in the pharmaceutical industry.
The problem is that the federal agency responsible for antitrust oversight of drug companies — the Federal Trade Commission — has a terrible track record of supporting the public interest.
And the reason why can be seen in the career trajectory of one woman: Deborah Feinstein, director of the FTC’s Bureau of Competition, the agency’s main enforcement entity. During Feinstein’s tenure, the FTC has largely abandoned its attempts to block mergers, instead favoring consent agreements that have a history of failing to achieve their goals.
Feinstein has gone back and forth through the so-called revolving door. From 1989 to 1991, she worked at the FTC as an assistant director in the Bureau of Competition. In 1995, she moved to high-powered corporate law firm Arnold & Porter, becoming a partner and the head of the firm’s antitrust practice. Feinstein “specialized in representing clients before the FTC and Department of Justice,”including General Electric, NBC Universal, Unilever, and Pepsi.
On its website, Arnold & Porter brags about its robust practice in helping pharmaceutical and medical device companies “respond to complex regulatory and compliance changes.”
In 2013, Feinstein returned to the FTC to run the Bureau of Competition, while reportedly speaking fondly about how her private practice experience informed her decisions.
Arnold & Porter’s antitrust group, in fact, has a pipeline into government service. Lawyers from the group have become chair of the FTC, general counsel of the FTC, director of the FTC’s Bureau of Competition, and head of the Justice Department’s Antitrust Division. The current Antitrust Division chief, William Baer, had two stints at the FTC in between his tenure at Arnold & Porter. Robert Pitofsky, former chair of the FTC, also went back and forth between the agency and Arnold & Porter. And it’s an open secret that Feinstein will return to Arnold & Porter again after her stint is up.
“The elite D.C. antitrust bar is a small, chummy circle whose members spend most, if not all of their time representing corporations,” said Jeff Hauser, who runs the Revolving Door Project at the Center for Effective Government. “Law firms eagerly market their attorneys’ government experience, signaling to clients that their team possesses relationships with current regulators.”
Two federal agencies handle antitrust enforcement: the FTC’s Bureau of Competition and the Department of Justice’s Antitrust Division. They informally split up industries to cover, and the FTC has responsibility over several health care-related industries, including pharmaceuticals, medical devices, and consumer health products. Those happen to be among the fastest-consolidating industries in America.
Earlier this month, the FTC let Dyax’s $6 billion acquisition by Shire Pharmaceuticals go through, choosing to take no action before the antitrust waiting period lapsed. Even Wall Street expected a challenge; when it didn’t transpire, Dyax’s stock jumped 13 percent.
It was the latest in a rush of mergers and acquisitions in the industry. There were$221 billion in pharma mergers in just the first half of 2015, even more than the $162 billion for the entire previous year.
And consider what these giant companies do: Valeant Pharmaceuticals has acquired, licensed, or agreed to co-promote over 140 drugs since 2008, and as part of its strategy it buys the rights to rival drugs and increases the prices overnight by as much as 525 percent.
Horizon, another drugmaker, sells a medication called Duexis, which costs $1,500 a month, even though its component drugs cost no more than $40 a month. In 2013, Horizon acquired Deuxis’ main competitor, called Vimovo, and raised the price 600 percent.
Questcor performed the same trick by buying the main rival to its immune-deficiency drug. The FTC never challenged any of these purchase agreements.
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