PCC OKs GlaxoSmithKline’s acquisition of Pfizer’s over-the-counter drugs portfolio

Antitrust watchdog Philippine Competition Commission (PCC) has given the thumbs up for GlaxoSmithKline Consumer Healthcare Holdings Ltd. (GSK) to acquire Pfizer Inc.’s Consumer Healthcare Business, which includes over-the-counter medicine portfolio.

Citing a decision dated June 27, the PCC said Thursday it cleared the after finding that “it is not likely to lead to substantial lessening of competition in the relevant markets of pediatric and adult cough medicines, pediatric painkillers, and vitamins.”

The antitrust review covered how the combined stakes of GSK and Pfizer may exercise market power by raising prices of medicines—over which they were competitors in the same market—and the possibility of how similar products carried by both firms might become less active or be pulled out of the market once both entities are merged.

The PCC, however, found overlaps between GlaxoSmithKline and Pfizer brands.

“In the adult cough medicines, GSK owns expectorant Ambrolex, while Pfizer owns Robitussin; GSK has Sinecod, Pfizer has Loviscol. In the children’s cough medicines, GSK has Ambrolex, Pfizer has Robikids; GSK has Sinecod Syrup, Loviscol Syrup,” it said.

“For children’s analgesics (painkillers), GSK has Calpol and Voltaren, while Pfizer has Advil Suspension for kids. For children’s vitamins, GSK has Scott’s Vitamins, while Pfizer has Children’s Clusivol since its other nutritive health digestives (vitamins) such as Clusivol, Stresstab, Centrum Adult, and Centrum Silver are for adults,” it added.
 
The transaction was given the green light, the PCC noted, because there was limited incentive for the two companies to increase prices in the local market.

“This is due to the finding that customers’ brand loyalty to medicines that have worked for them in the past means limited diversion between GSK and Pfizer drugs,” the antitrust watchdog said.

The company coming out of the merger will have little incentive to reduce innovative new products because there is competition exerting pressure on the merged firm.

There is no significant change in the respective market positions of the companies involved in the merger.

“This is because there is competitive constraint from other market participants that could make the GSK-Pfizer alliance sensitive to price increases,” the PCC said.

Since both GSK and Pfizer’s portfolios include a full range of medicines, the antitrust body noted there is neither ability nor incentive for the merged entity to tie and bundle over-the-counter products with prescription products.

“This is due to the functional differences in business model of the parties, the lack of high-demand products susceptible to bundling between them, and the threat of distributors and retailers (as customers) switching to other manufacturers when GSK-Pfizer increase prices,” the PCC noted.

The conditions that facilitate coordination among competitors in the identified markets are not likely to change significantly after the transaction, and cannot conclusively be found to lead to cartel-like effects, according to the PCC.

“In the Philippines, the transaction is a pure acquisition of assets including inventories, stock-in-transit, equipment, contracts, intellectual property, among others,” it said.

GSK, the acquiring ultimate parent entity, will issue to Pfizer non-controlling shares that will represent 32% ownership interest in the acquired over-the-counter unit.

Post-transaction, GSK will own and control 68% of the acquired unit. —VDS, GMA News