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In Pfizer-Wyeth Merger Suit, It's Capitalism v. Socialism

The suit filed by various pharmacies to block the Pfizer-Wyeth merger is probably a non-starter. Europe already approved the deal; the region is generally stricter than the U.S.'s FTC.

But the suit is worth reading if you want to put in context the sheer size of the merger. It also delineates a faux conflict between the forces of capitalism (pharmacies) and socialism (drug companies): The pharmacies want to deal with a large number of small competitors, all squabbling for market share; the drug companies want to take advantage of a $22.5 billion government bailout in order to dominate the market like an East German automaker.

Bonus moment: The lawyers didn't get the name of Pfizer CEO Jeff Kindler right! (Click to enlarge.)

The suit argues that the $68 billion deal should be nixed by the courts because four of the five banks giving loans to Pfizer for the deal took TARP bailout money from the Feds, thus distorting the market in the favor of monopolization. Here are the numbers:
  • Banks who took TARP bailout cash:
  • Bank of America/Citigroup: $85 billion.
  • Goldman Sachs/JP Morgan Chase: $35 billion.
$22.5 billion of that money is financing the merger. The combined company will take nearly 40 percent market share of all drugs sold, the suit alleges:
  • Market share:
  • Pfizer: 26%
  • Wyeth: 12%
Among the drugs that formerly competed, but post-merger will not, are:
  • Pfizer, Wyeth
  • Zoloft, Effexor
  • Zyvox, Tygacil
  • Sutent, Torisel
Given that the federal government authorized the TARP funds in the first place, the courts will likely not rule in the pharmacies' favor. But as a political matter, it's hard to see the benefit to consumers in such a consolidation.

Hat tip to Shearlings Got Plowed.

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