U.S. regulators question Fresenius IV iron deal, set reimbursement terms

WASHINGTON—Before approving a deal in which dialysis provider Fresenius Medical Care obtained exclusive licensing rights to the drug Venofer, the U.S. Federal Trade Commission (FTC) raised competition concerns and set terms under which Fresenius wouldn’t be able to artificially increase the price of the IV iron drug.

“Each year Medicare pays hundreds of millions of dollars for intravenous iron products used in kidney dialysis centers across the country,” David P. Wales, acting director of the FTC’s Bureau of Competition, said in a statement. “The commission’s action today will ensure that the transaction will not increase the prices for this life-saving drug.”

Venofer and Watson Pharmaceuticals’ Ferrlecit are the two most commonly used drugs to treat iron deficiency anemia in dialysis patients. According to Fresenius, Venofer’s U.S. market share is approximately 55 percent.

In July, Fresenius signed an exclusive 10-year U.S. manufacturing and distribution sublicense for Venofer with Luitpold Pharmaceuticals, which is owned by Tokyo-based Daiichi Sankyo Co. Luitpold makes and sells the iron drug through its subsidiary American Regent.

Under the deal, Fresenius has exclusive rights to make and sell Venofer in dialysis clinics while Luitpold would continue to sell the iron drug the non-dialysis market. And on Sept. 16, Fresenius and Luitpold closed the deal after the FTC approved the agreement under the antitrust Hart-Scott-Rodino Act. The FTC, however, had competition concerns, which were outlined in a complaint that challenged the deal.

ASP+6

A majority of U.S. dialysis costs are paid for by Medicare, and the FTC said that IV iron Medicare payments account for approximately $400 million. Currently, dialysis clinics are reimbursed based on a drug manufacturer’s Average Sales Price (ASP) plus six percent. That ASP, which drug manufacturers report to Medicare, is based on the average prices customers pay for the drug, including discounts and rebates.

“A clinic’s profit depends not on just how much it pays for the product but the difference between the clinic’s acquisition price and the average sales price,” the FTC wrote in the complaint. “An independent clinic, one not vertically integrated with the sale of the product, prefers, all other things equal, an acquisition price that maximizes the difference between its acquisition cost and the average selling price.”

The Deal’s Competitive Affect

In its complaint, the FTC wrote that the proposed deal would give Fresenius the ability to increase Venofer’s ASP forcing Medicare to pay higher prices for the drug. The theory is that the ASP trends downward because of market forces; however, with Fresenius in control of Venofer, the market would no longer determine the price Fresenius clinics would pay for IV iron, according to the FTC.

“Instead, the price Fresenius’s clinics pay will become an internal transfer price, and that internal transfer price could become the price that Fresenius reports as the price it charges its own clinics for the products,” the FTC wrote. “Increasing the internal price would, in turn, increase ASP and, hence, reimbursement to clinics, including Fresenius, for their use of Venofer.”