Big and growing bigger via innovative product lines is one way to see the proposed $43 billion merger of two biotech companies, Pfizer (PFE.N) and Seagen (SGEN.O), both based in the US, announced in March.
To analyze that proposed corporate structure, we turn to Robin Feldman, the Arthur J. Goldberg Distinguished Professor of Law, Albert Abramson ’54 Distinguished Professor of Law Chair and Director of the Center for Innovation at UC Hastings in San Francisco, Calif.
“For large pharma companies,” she told The Progressive Populist, “innovation comes through strategic acquisitions, rather than in-house. Whether because patent protection has expired or demand for existing products has downshifted, acquisitions are the lifeblood for large pharma.”
Pfizer is one of the largest pharmaceutical firms globally. The pandemic spurred Pfizer to grow bigger yet. Consumer demand for Pfizer pharmaceuticals is losing steam. Speaking of softening demand, Pfizer cut its revenue projection for 2023 by $9 billion, due to the weakening of sales for COVID-19 mRNA vaccines, which had left the firm flush with cash.
That was then. High demand for the company’s pandemic vaccines had boosted revenue, but has softened since the early phase when the population had no immunity to fight the disease.
On a related note, Pfizer recently announced plans to hike the COVID treatment of Paxlovid to $1,390 per a five-day course. That triples the amount of a Paxlovid course, well above the rate of inflation, or a general rise in prices, in the EU and US. There will be different prices for Paxlovid in the marketplace, depending on the status of a patient’s health insurance status.
“Health plans will probably pay much less than the list price for the pills,” according to a Stat reporter, “and most patients will have a small or no out-of-pocket cost because Pfizer is expected to offer price discounts and help patients with their out-of-pocket charges. Pfizer has already faced criticism from doctors and patient advocates that raising the price will limit patient access.”
Meanwhile, Seagen specializes in the making of anti-cancer medications called antibody drug conjugates, or ADCs. That product line would diversify the current medications that Pfizer sells. ADCs have the potential to expand Pfizer’s global market share and profitability. We return to Prof. Feldman.
“In addition, as with the proposed Seagan acquisition, many companies are pivoting toward cancer therapeutics. Enhanced intellectual property protections combined with high prices for the products creates an irresistible pull.”
Patents to private firms do last 20 years. These government-granted patents allow, for example, pharmaceutical firms to price medications up to 1,000% above production costs, according to Dean Baker, an author and economist with the Center for Economic and Policy Research in Washington, DC. That is a legal license to print money, folks.
On Oct, 19, the 27-member European Union granted unconditional antitrust approval, begun September 23, 2023, to the proposed Pfizer-Seagen merger. “The Commission concluded that the transaction would not raise competition concerns in the European Economic Area (EEA).”
The regulatory approval process for the proposed Pfizer-Seagen merger is proceeding at a slower pace for the US Federal Trade Commission, which has a mission to protect American consumers. The FTC declined a request to comment and share premerger documents with a reporter.
Spoiler alert: Post-merger reorganization can result in employee layoffs. Why would Pfizer and Seagen both retain their current IT employees? The same question could also apply to other parts of the companies’ operations, bringing cost-savings to Pfizer. The scope of the proposed merger of drug companies at least on the American side of the Atlantic, suggest that is a factor in the deliberate character of FTC regulatory approval. “An acquisition of this size will tempt regulators to scrutinize the deal with great care,” according to Prof. Feldman, author of “Drugs, Money, & Secret Handshakes: The Unstoppable Growth of Prescription Drug Prices.”
The proposed merger agreement calls for Pfizer to “acquire Seagen for $229 per share in cash,” according to the cancer-drug company’s statement. Following the expected FTC approval, “the acquisition is expected to close in late 2023 or early 2024.
The law firm of Wachtell, Lipton, Rosen and Katz, advising Pfizer in the proposed acquisition of Seagen, declined a request for comment.
Seth Sandronsky ives and works in Sacramento. He is a journalist and member of the Pacific Media Workers Guild. Email sethsandronsky@gmail.com.
From The Progressive Populist, December 1, 2023
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