Also included in the divestiture agreement is a requirement that Grifols partner with another competitor, Kedrion, and manufacture three blood-plasma products for the Barga, Italy-based company. The cross-licensing agreement, according to the FTC, will expedite Kedrion’s move into the U.S. market and create a competitor in the place of Talecris.
“The market is a very consolidated market already,” said Bill Woodward, a senior director of pharmacy contracting at group purchasing organization Novation. Yet while the deal is not likely to have a “profound effect” on prices, Woodward said, “it is doing a couple of things that might, in my opinion, positively impact pricing in the market.”
Talecris, Baxter and CSL control about 80% of the U.S. market for immune globulin, one of the therapies included in the cross-licensing agreement. A fifth company, Octapharma, withdrew its immune globulin product in 2010. Woodward said that with the introduction of Kedrion, the same number of companies will manage about 85% of the U.S. market, making it more competitive than before.
“This acquisition really makes Grifols a much more competitive player,” Woodward said. “They can match up very well against CSL and against Baxter, the other two dominant players.”
The market’s consolidation was a previous concern for the government and the private sector.
The FTC scuttled a proposed $3.1 billion deal in 2009 between Talecris and Melbourne-based CSL. In addition, a number of lawsuits, recently consolidated on a single docket, allege that CSL and Baxter worked with the industry’s trade group, the Plasma Protein Therapeutics Association, to fix and raise prices on blood-plasma products.
FTC Commissioner Julie Brill issued a concurring statement expressing reservations about whether the agreement reached with Talecris and Grifols “does enough to remedy competition concerns.” “The industry has operated as a ‘tight oligopoly,’ in the words of a 2007 HHS report, carefully controlling supply, avoiding robust price competition, and engaging in signaling of future competitive moves,” Brill wrote.
And, what makes the market challenging for new companies are the costs associated with developing the products and building the facilities.
Woodward said profit margins are low for the pharmaceutical companies that do enter the sector, in part because the process in which plasma is collected and then developed into a final product can take nine months. The cost of blood-plasma products for one patient can exceed $90,000 a year, according to the complaint filed by the FTC against CSL in 2009.
“This market is very unique because there’s been a traditional fluctuation in supply and demand that has caused short markets and long markets,” Woodward added.
Brill also addressed concern in her statement about the availability of blood-plasma products, noting that safety net hospitals have reported difficulty obtaining immune globulin, which is used to treat patients with immune deficiencies, under the government’s 340B Drug Pricing Program—an issue that also was raised by the FTC during CSL’s bid for Talecris.
Brill noted that blood-plasma products manufacturers “have not made their products available at statutorily mandated prices” and that the government will monitor additional consolidation and any reports of coordinated activity within the blood-plasma products market.
Safety net hospitals say the FTC’s required divestitures do not adequately address the possible harmful effects of the deal.
“While we are disappointed that the merger went through, we are pleased to see that one of the FTC commissioners raised concerns about access to these products for safety net hospitals,” said Ted Slafsky, executive director for Safety Net Hospitals for Pharmaceutical Access.
Greg Doggett, associate counsel for the organization, added: “We’re not sure that this divestiture goes far enough to address our concerns about access to these products at 340b prices, particularly in the short-term.”