The game of “Monopoly” is over– at least that’s what the Federal Trade Commission would have called it. Worried that CSL Behring would become too big after acquiring Talecris, and concerned that there was some antitrust issues, the FTC slapped the wrists of these two billion dollar plus companies and announced it would oppose the merger through the US courts, if necessary. Talecris management decided to withdraw from the $3.1 billion takeover deal by CSL Behring.
The US FTC opposed the proposed merger by alleging that the US plasma market was a tightly-controlled oligopoly, and that the merger would violate antitrust laws. CSL Behring has rejected these claims. The merger would have left CSL Behring the biggest plasma manufacturer in the world.
I read that CSL, Talecris and market leader Baxter International of Illinois have 83% of the US market for blood-based drugs; hemophilia plasma-derived products are included in this.
Just a little history: Talecris is the company formed in 2005 when Bayer spun off its plasma division. Bayer produced a plasma-derived factor VIII product called Koate DVI. Talecris inherited it and still produces it. It’s a big company, with 2008 sales of over $1.4 billion. It’s not big in hemophilia in the US, but it is a major player in the immune deficit disorders community.
The proposed sale to CSL Behring is no surprise. I’ve heard from the get-go that management at Talecris would expand the company, and then sell it and reap the profits. Private equity companies Cerberus Capital Management and Ampersand Ventures together bought the plasma division of Bayer for more than $300 million. And now it’s up for $3.1 billion.
So what happens now?
Well, we still have seven licensed manufacturers of factor on the US: Baxter, Bayer, CSL Behring, Grifols, Novo Nordisk, Wyeth and of course, Talecris. I wouldn’t be surprised if more mergers are proposed down the road but the FTC ruling might make it impossible to accomplish. Our community, our industry, is small and carefully watched. And the Obama climate seems to be very antitust-conscious.
Neal R. Stoll and Shepard Goldfein, in the New York Law Journal (November 19, 2008) note, “In his September 2007 statement to the American Antitrust Institute (AAI), President-elect Obama noted that ‘[a]ntitrust is the American way to make capitalism work for consumers.’ President-elect Obama emphasized that, ‘the [Bush] administration has what may be the weakest record of antitrust enforcement of any administration in the last half century,’ and he specifically cited lax merger enforcement for the rising cost of health insurance.” The authors then go on to say that antitrust laws are not good tools to effect economic engineering.
Read more about plasma derived products–their role in hemophilia history and today, in the next issue of PEN.
Big news from the corporate hemophilia world: CSL, maker of blood-plasma products, including Monoclate-P, Mononine, and Humate-P, has been foiled in its courtship of Talecris, also a maker of blood-plasma products, most notably Koate DVI. “The US Federal Trade Commission (FTC) recommended legal action to block the proposed $3.1 billion purchase of Talecris Bio- therapeutics Holdings,” writes Bloomberg news.
Why can’t CSL buy Talecris? What has lawmakers ruffled up about this? Gobbling up Talecris would place CSL at the top of the blood plasma food chain. This includes hemophilia, as well as autoimmune disorders and multiple sclerosis. Something about this screams violation of antitrust to Washington.
Antitrust law prohibits any activity that restricts free trade and competition between businesses, especially those that would lead a company to a dominant position–a monopoly. So the government is always sniffing out predatory pricing, price gouging, and mergers and acquisitions of large corporations. The FTC website says, “Courts have applied the antitrust laws to changing markets, from a time of horse and buggies to the present digital age. Yet for over 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.”
And antitrust laws have been around longer than 100 years. Wikipedia says: “The history of competition law reaches back to the Roman Empire, with the Lex Julia de Annona, enacted during the Roman Republic around 50 BC. To protect the grain trade, heavy fines were imposed on anyone directly, deliberately and insidiously stopping supply ships.”
The term “antitrust” is American, and arose when large American corporations used trusts to conceal business arrangements. Big trusts meant big monopolies, and when you have a monopoly, you can easily control supply and demand, and prices. You have no competition. Have you played the game Monopoly and landed on your friend’s Park Place, the one with a red hotel? Ouch. Consumers have suffered at the hands of those with monopolies.
In America, monopoly is perceived even as a threat to democracy. The FTC website writes: “Free and open markets are the foundation of a vibrant economy. Aggressive competition among sellers in an open marketplace gives consumers — both individuals and businesses — the benefits of lower prices, higher quality products and services, more choices, and greater innovation. The FTC’s competition mission is to enforce the rules of the competitive marketplace — the antitrust laws. These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices.” http://www.ftc.gov/bc/antitrust/index.shtm
Perhaps the FTC thinks that a CSL acquisition of Talecris would make the company too big for its britches, too powerful? Talecris, owned by the private equity groups Cerberus Partners and Ampersand Ventures, had revenue of about $1.4 billion in 2008. CSL had $2.97 billion in revenue in the year ending June 2008. Together they would dominate the blood plasma field, surpassing Baxter, which is now top dog. Indeed, Talecris, Baxter and CSL already control 83% of the US market. Other producers include Grifols, which makes blood products, and Octapharma, which also makes blood products although its factor products are not yet registered in the US.
What’s next? After the FTC publishes its reasons for preventing the acquisition, CSL will then decide what to do. Wooing a prospective partner when the parents don’t approve is expensive. But not so bad as in Roman times: Under Diocletian in 301 AD businessmen faced the death penalty for violating a tariff system, for example by buying up, concealing or contriving the scarcity of everyday goods. Death penalty? Thankfully we don’t do things gladiator style anymore. If CSL cannot complete the deal, the company will be liable to pay a $75 million break fee to Talecris’s owners, Cerberus Partners and Tribeca Investment Partners, a company spokeswoman said. That should soften any break up. Stay tuned!
Interesting Book I Just Read The Blue Sweater by Jacqueline Novogratz
Novogratz started her career as a young, starry-eyed do-gooder out to change the world, and got an eye-opener working in Africa in the 1980s for various nonprofits. She had valuable experiences about what works and what doesn’t in helping the poor. Eventually, she returned to the US and founded the Acumen Fund, which finances businesses in the developing world that give jobs to the poor, tackle issues of poverty and offer microloans. From a one-woman show to heading a huge NGO now, her story is very interesting. In many ways it’s an homage to the African women who struggled alongside her and taught her, and learned from her.
But it’s not without problems: the book seems to have been written by two people, or at least in two voices. The first half is all anecdotal, about Novogratz’s efforts in Africa to help local women start a baking business, in great amounts of detail, without stats about poverty, its root causes. I care less about what color dresses the women wore (this seems to come up a lot!) than about how her efforts compare to other NGOs at the time. Her story paints a very accurate picture of what you still can see in Africa and what the challenges are. I would have found it more interesting and useful had she interspersed history, poverty statistics and analysis in it. The second half shifts suddenly to the Acumen Fund and there is almost nothing but statistics, and all success stories. Sounds like a promotional piece. Gone is the author’s personal style, which was full of feeling and self-reflection. The Acumen Fund is portrayed as a little too perfect, which I suppose happens when you write about the nonprofit you head. I would like to have seen more objectivity. Some of the stories made me cringe, not due to the nature of them, but they seem a bit self-serving. For example, the author shares a story of being in rural Pakistan, and hearing gun shots. Is it the Taliban? Warlords? Momentum builds. You might think she may be kidnapped (a la Daniel Pearl) but turns out it’s only the townspeople warning a local thief to give himself up. Big yawn. Nothing to do with her. In trying to spice things up, Novogratz comes out looking a bit needy for attention.
What I loved best are her vivid and accurate portrayals about the lives the people lead in developing countries, the daily struggles they face, the hardships they bear and overcome. Death is a constant, woven into their fabric of daily living, she writes and I have often thought that too. Only people who visit or live in these places truly understand the needs of the poor. Norogratz has definitely walked the walk; she has lived as a poor person, in subhuman dwellings.
I do wonder about Acumen’s not-so-successful stories, which are not mentioned and must exist: loans gone bad? I mean, Acumen gives a $600,000 loan to a local businessperson with diamond rings and expensive watches… what happens when they skip town, pad their books? I’ve seen nonprofits report how everything is successful– I mean, everything– and it raises eyebrows. Having been to developing countries, knowing their complexities, and the corruption and temptation, I am sure that Acumen has had some bad moments.
It’s an interesting story for sure, but for seasoned humanitarians, the book offers little meat. I applaud her efforts and devotion but the book would have been better written by a more objective third party. For those new to humanitarian aid, you’ll enjoy this, but also please read Mountains Beyond Mountains, both much better written, and better at both analyzing roots of poverty and solutions, and at providing a political/historic perspective. Two and a half stars.
Pfizer is the largest pharmaceutical company in the world and has a history of buying other pharmaceutical companies to add to its showcase of drugs. Over the last 10 years, Pfizer has acquired Warner Lambert, Pharmacia and other specialty pharmaceutical and biotechnology companies. It’s at it again, with the announcement that it has bought Wyeth for $68 billion. Among the many top drugs Wyeth produces are two recombinant factor products: BeneFIX and Xyntha.
According to www.biojobblog.com January 23, 2009, “Like many of its competitors, Pfizer believes that biotechnology is the ‘next big thing’ and its executives have publicly disclosed their intentions to get into ‘protein-based therapeutics.'” And Wyeth has the biotech products that apparently Pfizer wants.
What does this mean for hemophilia patients? Nothing right now. Wyeth wants to assure all customers and patients that it will continue to supply its products as usual. Anyone with questions about supply can contact their local HTC; your hematologist can get in touch with the local Wyeth rep. Or let me know and I can get through to Wyeth for you.
This new was a bit of a surprise to most of the community, but change is something that should not surprise you anymore in hemophilia. With the wave of insurance changes that have been happening for the past four years, change seems inevitable, and will continue. Stay tuned!
Book I Just Read Daily Wisdom: 365 Buddhist Inspirations by Josh Bartok Well, I didn’t just read it; I read one page each day last year. One page a day, to learn some insightful bit of Buddhist wisdom to think on. Culled from many different sources, this book offers some very interesting comments about 50% of the time. I admit there were things I didn’t quite get, but then, I am not a Buddhist. I did find plenty to enjoy and ponder, and thought this might make a nice gift to someone. Two stars out of four.
The hemophilia world is buzzing with the latest acquisition announcement: CSL Limited will buy Talecris Biotherapeutics Holdings Corp., one of the world’s leading manufacturers of plasma-derived protein therapies. One of these therapies is Koate-DVI, a plasma-derived factor VIII clotting concentrate. The move will make CSL a stronger competitor in the $15 billion global plasma products market. Selling price? US $3.1 billion.
How will this affect the US market, with so many changes underfoot?
One concern is what will happen to Koate DVI. CSL Behring already has two plasma derived factor VIII concentrates, Monoclate® P and Humate® P. Will it need three? We may be jumping the gun in speculating. Talecris is reaching out to its customers to assure them that the acquisition will not affect production for the foreseeable future. Below is a letter from Talecris, which I am reprinting with permission. We’ll be watching developments closely, and will let you know more in the near future. And let me add: we’ve been predicting consolidations, both in home care and in pharma, for the past four years, and so they continue. We will monitor industry and as always, try to discern how consolidations and acquisitions, and product changes, will affect you, the consumer.
August 13, 2008
Dear Hemophilia friends, partners, and patients:
You may have heard Talecris Biotherapeutics and CSL have entered into a definitive agreement for CSL to purchase Talecris, pending the necessary regulatory approvals.
Please note that our commitment to provide high quality and effective products to our customers remains our paramount concern, and that has not changed — nor will a transaction affect any of our existing contracts to supply Koate-DVI Antihemophilic Factor (Human).
While the transaction moves through regulatory review, we will continue to serve our customers and the patients who rely on us by providing a reliable supply of safe and effective protein therapies. Additionally, we will continue to invest in improving our products, increasing the availability of our therapies, and developing innovations to enhance the lives of our patients. In short, you can rely on us now and in the future, however that future unfolds.
Talecris Biotherapeutics recognizes that the availability of Koate-DVI, is a paramount issue for the patients around the world. It is an issue of extreme importance to us, and one in which we have invested heavily to resolve for the patients we serve. In the past several years, we’ve invested over $150 million in the vertical integration of our plasma supply chain to enable long-term reliable supply, and tremendous progress has been made in taking the necessary steps to ultimately increase the supply of Koate-DVI.
* Talecris has invested significantly in our Clayton manufacturing facility, which operates nearly 24 hours a day, 365 days a year. In fact, we are completed an extended planned maintenance in order to significantly upgrade portions of our facility where Koate-DVI is produced. These upgrades will allow us to support increased worldwide demand and meet current commitments to supply Koate-DVI to our patients.
* Talecris Plasma Resources, Inc. (TPR), will further ensure a reliable, consistent supply of plasma for the long-term and we continue to invest significantly in improving the output of these centers and opening new centers.
* CSL, like Talecris, is a key global player in the plasma biotherapeutics industry dedicated to treating rare and serious diseases, and is passionate about improving the quality of life for patients throughout the world. We believe a combined entity would accelerate our ability to develop and deliver therapies that enhance the lives of patients who depend on us.
Book I Just Read:How Elizabeth Barrett Browning Saved My Life by Mameve Mamwed
I don’t usually read fiction, especially not romantic fiction, but this book was a gift, and personalized by the author at that, so I could not avoid reading it. And I am glad I did: a little charmer of a book, easy to read and very well done. The real story’s about love, wrapped up in a plot about how an antique chamber pot turns the life of a struggling, young, intelligent antiques dealer with poor self-esteem upside down. Abby thinks her life is about to get better when the pot is appraised at $75,000, as it was once owned by poet Elizabeth Barrett Browning. But it’s the beginning of a lot of trouble, and a lot of introspection as to the nature of relationships when relatives and friends come out of the woodwork to get a piece of Abby’s fortune. I loved all the literary references and as it takes place in Cambridge, Massachusetts, hearing about places well known to us Yanks. Three stars.
Those hungry home care companies are at it again. This time, Apria Healthcare Group Inc. announced on October 15 it has purchased Coram Healthcare, a privately-held national provider of home infusion and specialty pharmaceutical services, for $350 million. Coram is a home healthcare company that provides factor, but is best known for its top notch home nursing services. Indeed, this shining reputation was one of many qualities which attracted Apria. The acquisition will create the leading, nationwide home infusion provider. A bigger attraction? Apria can now enter the specialty pharmacy market, which seems to be attracting everyone these days. This means they can benefit from Coram’s position as seller of factor in the hemophilia marketplace. Even insurance companies themselves are opening up their own specialty pharmacies, the very entities they reimburse!
As we’ve been predicting for the three years, there have been continued acquisitions as hemophilia home healthcare companies, whose profits are being squeezed by shrinking government and private insurance budgets, struggle to survive.
But both Coram and Apria view the acquisition positively. From the Coram website: “This is a transformative event for Apria Healthcare,” said Lawrence M. Higby, Chief Executive Officer of Apria Healthcare. “The transaction supports our strategy of diversifying our service offering by adding and expanding complementary product lines that fit well with our core competencies. In addition, this expansion makes Apria significantly less reliant on government reimbursement policies, since government payors will represent a smaller percentage of our overall business. As a leading provider in the home infusion industry, Coram has long been known for its patient care-focused reputation, clinical leadership and innovative programs which benefit patients, manufacturers, physicians and payors alike. We believe the combination will enable us to serve our combined patient and customer base even better.”
Good news for hemophilia patients of Coram: Coram’s current management team will stay in place to coordinate the integration of the two companies’ infusion businesses. This should ensure that the special needs of hemophilia patients are not left in inexperienced hands.
For more information, visit www.apria.com and www.coramhealthcare.com. And stay tuned for more mergers, which are sure to continue.
Great Book I just read: The Ghost Map, by Steven Johnson. This is the fascinating account of the cholera epidemic that hit London in 1854. The simple tossing of a soiled diaper by the mother of an infected infant into a local cesspool used by neighbors led to an epidemic that wiped out whole families in hours, hundreds in a matter of days, and thousands as the weeks dragged on. More than just a recording of this horrible event, author Johnson has the reader accompany Dr. John Snow, a physician of incredible brilliance and courage, as he bucks tremendous professional pressure and traditional medical wisdom that cholera is transmitted via air, and seeks to finds its true source, at a time in history when microbes were not even known.
Johnson skillfully shows how the explosive growth of cities reaped an environment ripe for bacterial disaster; London had 2 million people, and no public sewer system. With citizens emptying human waste directly into the Thames, the city’s water supply was tainted. But it took an incredible convergence of truth seekers, including John Snow, to fight the public health bureau, and discover the true source: the Broad Street pump.
Snow’s groundbreaking research and methods are still used today, and brought about a permanent change in our understanding of how infectious disease is spread. This is an amazing book! I learned so much, and can see that major cities in the developing world are not unlike London only 150 years ago. This simultaneously disturbs me, in this day and age, but also gives me hope for the exploding cities of the world like Mexico City, Delhi, and Dhaka. Johnson’s otherwise perfect book is marred only in his conclusion/epilogue, which gets unfocused as he tries to relate the story to every single contemporary event, in a preachy lecture. A+ content, B+ style.