FTC Sues to Stop Drug Industry Mergers

The Federal Trade Commission on Monday sued to block two drug distribution mega-mergers that, if allowed, would give most of the nation’s wholesale business for prescription drugs to two corporate giants.

In similar actions filed in federal court in Washington, the agency seeks to block the acquisition of Bergen Brunswig Corp. in Orange by Cardinal Health Inc. of Dublin, Ohio, and San Francisco-based McKesson Corp.’s purchase of AmeriSource Health Corp. in Malvern, Pa.

The agency, urged by its staff to block the deals, contends that the mergers of the nation’s four largest drug distribution companies would cause drug prices to increase. McKesson is the nation’s largest drug wholesaler, Bergen Brunswig is No. 2, Cardinal is No. 3 and AmeriSource is No. 4.

Executives at the companies said they’re considering whether to challenge the FTC. They also have agreed to hold off their mergers until the court matter is resolved, according to the agency’s court filing.

Analysts were pondering whether the companies will challenge the agency. “It’s a tough call, though I’m leaning toward them challenging it,” said Donald T. Spindel, an analyst at A.G. Edwards & Sons Inc. in St. Louis.

Spindel sees the possibility for increased efficiency and cost reductions if the companies combine. He disputes the agency’s concerns over drug prices and maintains that the mergers would lower prices for consumers.

On Aug. 23, Cardinal announced plans to buy all of Bergen’s stock for about $2.5 billion. A month later, McKesson said it wanted to acquire all of AmeriSource’s stock for about $2.25 billion.

Last week, the agency’s commissioners voted 3 to 1 to halt the deals, saying that they feared the combinations would reduce competition in the wholesale market for drugs. They also expressed concerns that vital health care services, such as emergency deliveries of rarely used drugs, would deteriorate.

Bergen Brunswig shares closed Monday at $40.56 on the New York Stock Exchange, up 44 cents for the day. Cardinal rose $1 to $81, McKesson was up 19 cents to $55.94, and AmeriSource rose 25 cents to $59.69.