US sues to block drug merger

This is an audio transcript of the FT News Briefing podcast episode: ‘US sues to block drug merger’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, May 17th, and this is your FT News Briefing.

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US regulators are trying to stop a big drug industry merger. Kyiv says it’s blocked a Russian hypersonic missile attack. And Italy can’t come up with a plan to spend €200bn in Covid recovery funds. Part of the problem is with some of the spending proposals.

Amy Kazmin
There is a town that wants €100,000 or a little more to build a new nativity scene that they can put out at Christmas.

Marc Filippino
Our Rome correspondent will tell us what’s at stake if Italy can’t meet the deadline. I’m Marc Filippino, and here’s the news you need to start your day.

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Shares in two big US pharmaceutical companies fell yesterday after regulators sued to try and block them from merging. Biotech heavyweight Amgen plans to buy Horizon Therapeutics for $28bn. This is the first time in a decade that the Federal Trade Commission has tried to block a pharmaceutical deal. Here’s the FT’s Stefania Palma.

Stefania Palma
Amgen is already a significant market player that has a very strong position vis-à-vis some of the intermediaries in the drug prescription industry. What they are scared of is the fact that once you combine their current market power together with the access that they would have to Horizon’s very popular treatments, that they could further exercise control and push these intermediaries to prefer their own drugs in the market. And this is something that the FTC is very concerned about generally because the current chair, Lina Khan, has really heightened scrutiny of all the different market mechanisms in the pharma sector that could potentially harm consumers with higher prices.

Marc Filippino
Have Amgen and Horizon responded or have others in the industry responded?

Stefania Palma
Absolutely. So Amgen said that it was disappointed with this decision, that it remains committed to completing this deal. It also argued that over the course of months it had already addressed the questions that were raised by the regulator and that it had proven that basically the deal would pose no competitive harm. Importantly, I think just to get a sense of the stance of the two companies, they both said that they would work with the courts to try and close the deal by mid-December. So they are definitely determined.

Marc Filippino
What could this signal for the pharmaceutical industry in general?

Stefania Palma
I think companies are probably looking at this as a very strong sign that this might not be the only deal that is raising concern at the agency.

Marc Filippino
Stefania Palma is the FT’s US legal and enforcement correspondent.

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Kyiv was hit with a huge barrage of missiles early yesterday morning. It’s the latest in a series of attacks over the past two weeks. The FT’s Ukraine correspondent Chris Miller was in Kyiv when yesterday’s hit.

Christopher Miller
We woke up around 3am in the night and there were a series of loud explosions. The windows and walls of my apartment here in the city centre of Kyiv were shaking and it was incredibly intense. The missiles came in very quick succession. We found out later that Russia had launched these hypersonic Kinzhal missiles that are supposed to be unable to be intercepted. But somehow Ukraine’s air defence forces managed to shoot down six of them, as well as several drones, apparently.

Marc Filippino
So, Chris, how significant is it that Ukraine was able to knock out these weapons?

Christopher Miller
Yeah. It says very clearly that the western weapons that are flowing into Ukraine are working. Ukraine, of course, needs and wants more. President Volodymyr Zelenskyy was on this big European tour in Rome, Berlin, Paris, London over the weekend, and he managed to secure more western weapons, including some air defence weaponry. That’s going to be key as it gets ready to launch its counteroffensives, but just generally to secure its cities.

Marc Filippino
So, Chris, what does it say about where we are on the war? I mean, the big narrative around this time was supposed to be the big Ukraine counteroffensive. Does this attack by Russia undercut that?

Christopher Miller
No, I think what we’re seeing now is actually the beginnings of Ukraine’s counteroffensive and Russia trying to fend off that counteroffensive, really, before it gets going. If we look at what happened last year when Ukraine managed to wrest back a lot of this territory in eastern Kharkiv region and also in the south, taking the city of Kherson back from Russian forces, it actually took a month for Ukraine to get the ball rolling on that counteroffensive. And before its forces began streaming through Russian lines, it launched all of these missile attacks, hitting command and control centres, logistical hubs, artillery systems. And it’s doing that right now, too. You know, so this is all preparation for Ukraine really to get its counteroffensive going. And everyone in here is expecting it to get under way in earnest, likely within the next several weeks.

Marc Filippino
Chris Miller is a Ukraine correspondent for the FT. 

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Italy is the largest recipient of EU pandemic recovery funds — €200bn. But it’s having a hard time coming up with a plan for how to spend that money in time to meet the EU’s deadline. To find out what’s holding things up, I’m joined now by our Rome correspondent, Amy Kazmin. Hi, Amy.

Amy Kazmin
Hi.

Marc Filippino
All right. So what is the hold-up, Amy?

Amy Kazmin
Italy’s problem is that Italy is very slow to spend money. It has big bureaucracy, lots of administrative procedures. It’s supposed to keep to some very, very tight deadlines. And it is falling behind in meeting those deadlines. At the same time, a lot of money is also going to cities and municipalities where the local officials definitely have some strange ideas of what they want to do with the money. The money is supposed to be going to uplift neighbourhoods in areas that are a little bit down at heel, maybe in need of a boost. But some of the programs have been a little bit controversial and perhaps unusual.

Marc Filippino
Oh, I love controversial and perhaps unusual. Can you give us a little bit of a flavour of what’s out there?

Amy Kazmin
The first projects that really caught the attention of Brussels were, in fact, two big sports stadium projects. They were fairly large projects, around €150mn combined between the two of them. But there’s also a ton of little quirky projects in smaller cities and smaller towns, like there’s a town in Sicily that wants to finish building a horse racetrack that was started 30 years ago and never finished. There’s a town in Tuscany that wants to renovate the golf course with €4mn of public money. There’s another town that wants to build a solar panelled dog and cat shelter for stray animals. So there’s a lot of projects that people are really asking: Is this the kind of thing that public money should be spent for?

Marc Filippino
OK, so Rome plans to present the EU with a revised plan by the end of next month. What happens if the government can’t come up with a plan that’s acceptable and that uses the money up by the deadline in June 2026?

Amy Kazmin
So Italy’s ability to use or not use this money well and wisely will have repercussions for future financial integration in the EU and the willingness of the EU as a bloc to potentially engage in other common borrowing programs. But it’s also very important for Italy as a whole. Italy is a highly indebted country and needs to find a way to accelerate its growth, to make its debts more sustainable. And the investments of this Covid recovery fund are supposed to be a big way that it’s supposed to do that — modernising many aspects of its economy, strengthening infrastructure so that it’s in a position to grow faster, which would help make its debt burden more sustainable. So if it stumbles, it’s gonna make a lot of people and investors holding Italian government debt start to look a bit more nervously at Italy’s overall picture. So there is actually quite a lot at stake here.

Marc Filippino
Amy Kazmin is the FT’s Rome correspondent. Thank you, Amy.

Amy Kazmin
Thank you.

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Marc Filippino
You can read more on all of these stories at FT.com This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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