Federal laws limit economic activity in cases where businesses might engage in unfair competition or endanger consumers. The creation of a monopoly, especially in the medical industry, is a potentially expensive and dangerous reality for those who make use of certain medical or pharmaceutical services.
If there’s only one company providing treatment for a condition, for example, the failure of that company or the sudden closure of a production facility because of a contamination issue might lead to millions of people with no access to necessary medical care. Larger medical companies can invest more in research and may be in a better position to provide more affordable and effective medical treatments.
Therefore, regulatory agencies often watch changes to existing players in the medical and pharmaceutical sectors very carefully to determine if their movements could benefit or potentially harm consumers. For example, the Federal Trade Commission (FTC) recently filed a lawsuit to prevent a business acquisition involving drug companies.
Why did the FTC act?
The FTC asserts that Amgen Inc. would control too much of the market if it were to acquire Horizon Therapeutics PLC. The company would effectively have a monopoly on the drugs used for thyroid eye disease and chronic refractory gout. The FTC specifically cited the possible abuse of rebate programs to help strengthen a monopoly regarding the treatment of those two diseases. In theory, those seeking treatment for either eye issues related to thyroid conditions or gout could end up unable to access treatment due to a lack of competitors or trapped into paying an unfair price because there is no other company on the market to force the business to price its drugs competitively.
Business transactions can fail for many reasons
It remains to be seen if Amgen Inc. will be able to argue against the FTC’s claim and move forward with its acquisition of Horizon Therapeutics PLC. If the purchase fails, the situation will mean big losses for the businesses. The process of researching and negotiating a merger can be very expensive, and the cost involved may grow exponentially when the businesses face opposition from regulatory agencies. Therefore, companies contemplating mergers and acquisitions often need to plan carefully and look at the market before taking action to avoid enforcement actions or lawsuits that could derail the project or drastically increase how much it costs and decrease how much it benefits the business.
Understanding when regulatory agencies may attempt to stop pending acquisitions may help executives and other business professionals better recognize when mergers or acquisitions could be more problematic than beneficial for a company.