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THE LATEST: Losing Bidder for Pharmaceutical Triggers FTC Investigation, Fix, and $100 Million Fine in Non-HSR-Reportable Transaction

A private lawsuit filed by Retrophin Inc. (Retrophin), under then-CEO Martin Shkreli, likely triggered an investigation by the FTC into a consummated transaction.  Both the private lawsuit and the FTC complaint resulted in settlement.  In addition, the FTC levied a $100 million penalty.

WHAT HAPPENED:
  • In 2013, Questcor Pharmaceuticals, Inc. (Questcor) acquired the U.S. rights to Synacthen Depot (Synacthen) from Novartis (Mallinckrodt later acquired Questcor).
  • Questcor’s $135 million deal with Novartis out-bid several companies seeking to acquire Synacthen, including biopharmaceutical company Retrophin, who bid $16 million for the Synacthen license.
  • In 2014, Retrophin (under then-CEO Martin Shkreli) filed suit against Questcor, alleging that the purpose of the transaction between Questcor and Novartis was to eliminate competition for Achthar, Novartis’ ACTH drug used to treat infantile spasms and nephrotic syndrome, by shutting down Synacthen.
  • Retrophin’s case was settled in 2015 with Mallinckrodt (who acquired Questcor in the interim) paying Retrophin $15.5 million.
  • There are reports that the FTC challenged the consummated transaction of Questcor/Novartis following Retophin’s lawsuit. The FTC’s challenge recently resulted in a $100 million monetary payment and licensing of Synacthen for treatment of infantile spasms and nephrotic syndrome to an FTC approved licensee.
WHAT THIS MEANS:
  • Even if a transaction is non-reportable under the Hart-Scott-Rodino (HSR) Act, the FTC or DOJ may open an investigation into the transaction. The Questcor/Novartis transaction was not reported under the then-existing HSR rules because Novartis, the licensor, retained some manufacturing rights to Synacthen.
  • The FTC and DOJ may learn about potentially anticompetitive transactions in numerous ways, including HSR filings, news reports, complaints from disgruntled customers or competitors, private litigation involving the transaction, and as shown here, from the losing bidder.
  • HSR clearance or a determination that a transaction is not HSR reportable does not mean that the transaction is free and clear of government antitrust investigations or private litigation.



THE LATEST: FTC Fixes Consummated Pharma Transaction Involving Pre-Phase 3 Product Because It Eliminated a “Nascent Threat”—Tacks on $100 Million Disgorgement Penalty

The Federal Trade Commission (FTC) challenged a consummated transaction using a monopolization theory to allege that the acquisition would eliminate “nascent” competition for therapeutic adrenocorticotropic hormones (ACTH) in the United States.

WHAT HAPPENED:
  • Questcor Pharmaceuticals, Inc.’s (Questcor) H.P. Acthar Gel (Acthar) is the only ACTH product sold in the US, is the standard of care for infantile spasms and is indicated for several other diseases.
  • In 2013, Questcor acquired the US rights to Synacthen Depot (Synacthen) from Novartis. Questcor was subsequently acquired by Mallinckrodt.
  • Synacthen is pharmacologically very similar to Acthar, as the active ingredient in both drugs is an ACTH molecule.
  • At the time of the acquisition by Questcor, Novartis’ Synacthen had been used safely and effectively for decades in Europe, Canada and other parts of the world to treat patients suffering from infantile spasms and other diseases. Synacthen had not yet begun US clinical trials.
  • The FTC alleged a monopolization theory—that Questcor had “extinguished a nascent competitive threat to its monopoly” by outbidding several other companies who were interested in bringing Synacthen to market in the US to compete with Questcor’s Acthar.
  • Then FTC Chairwoman Edith Ramirez (she has since resigned) noted that Questcor had a history of taking advantage of its monopoly, repeatedly raising the price of Acthar “from $40 per vial in 2001 to more than $34,000 per vial today—an 85,000 percent increase.”
  • The FTC settlement requires a $100 million monetary payment and that Mallinckrodt (Questcor was acquired by Mallinckrodt) license Synacthen for treating infantile spasms and nephrotic syndrome to an FTC approved licensee.
WHAT THIS MEANS:
  • In some circumstances, an action by a monopolist to block a nascent threat to its monopoly can violate the antitrust laws.
  • Typically, the FTC does not challenge pharmaceutical overlaps involving pharmaceuticals that have not yet entered Phase 3 clinical trials because there is still significant uncertainty that a product will ultimately come to market.
  • The FTC appears to have made an exception to its typical practice because Synacthen was anticipated to gain US approval easily and compete significantly with Acthar. Synacthen was approved outside the US for decades and was understood to be a safe and effective ACTH treatment.
  • The FTC may bring an action at any time under Section 7 to determine the legality of an acquisition. However, the FTC challenged this consummated transaction under a Section 2 theory of monopolization. The FTC has many tools to challenge actions under the antitrust laws.



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