4 Drug Firms Warn Regulators of Battle to Save Mergers

The nation’s four biggest drug distributors served notice Wednesday that they are likely to battle efforts by federal regulators to block proposed mergers to create two corporate giants that would control much of the wholesale market for prescription drugs.

In federal court filings objecting to the Federal Trade Commission’s move to block the mergers, the companies insisted that the deals would help save costs, improve service and lower prices for consumers.

The proposed mergers would combine Orange-based Bergen Brunswig Corp. with Cardinal Health Inc., of Dublin, Ohio, and McKesson Corp., of San Francisco, with AmeriSource Health Corp. of Malvern, Pa.

The companies sought Wednesday to portray themselves as middlemen whose profits have been sorely squeezed by their suppliers, giant drug makers and their customers, such as hospital networks and mass merchandisers.

“The wholesalers must respond or disappear,” Cardinal Health and Bergen Brunswig claimed in their filings.

Last week, the commission voted against the mergers, saying the deals would significantly reduce competition and trigger higher drug prices for consumers.

The agency moved to seek a preliminary injunction to halt the mergers while it prepares its legal case to block them permanently.

Though the FTC contends the two corporations formed in the mergers would control more than 80% of the prescription drugs sold through wholesalers, the companies said full-line wholesalers like them handle a little more than half of the drugs distributed.

In addition, the wholesalers claimed Wednesday that they face stiff competition from smaller distribution outlets, including group purchasing organizations and distribution centers set up by chain pharmacies.

At the court hearing Wednesday in Washington, Cardinal attorney Bernard Nussbaum disputed the agency’s contention that it’s tough to enter the drug distribution business.

“It’s not rocket science,” he said. “It’s a warehouse and a delivery system. Anybody can enter it.”

U.S. District Judge Stanley Sporkin set a pretrial hearing for May 11, with a trial to begin shortly after that.

In court filings, the FTC contended that the companies are planning to join forces in part to eliminate an overcapacity problem that forced down prices.

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Bloomberg News contributed to this report.