For Your Data Ftc V. Primal Health, Inc. Illustration Brief Summary

FTC v. Cardinal Health, Inc. illustration brief summary
12 F. Supp. sec 34, 65 (D.D.C. 1998)

CASE FACTS
Cardinal, Bergen, McKesson, as well as Amerisource were the tiptop 4 firms inward the drug wholesaling business. These companies delivered drugs overnight to hospitals every bit good every bit independent pharmacies subsequently buying inward mass as well as warehousing drugs. In August of 1997, Cardinal announced that it was going to merge alongside Bergen, as well as thus McKesson.  Amerisource announced that they would merge, either because it was necessary to compete or simply to challenge Cardinal/Bergen.

DISCUSSION

Notable Case Facts

• Hospitals purchased 85% of drugs from wholesalers, 15% directly; independent pharmacies bought 95% from wholesalers; chain pharmacies (CVS, Rite Aid, Walgreens, etc…) purchased or thus 30 to 35% from wholesalers.
• Competition betwixt the wholesalers was thus violent that at that topographic point was essentially no delivery fee as well as the wholesalers made all their profits simply yesteryear paying the manufacturers 30 days early on as well as receiving rebates.
• The preliminary injunction was tried for vii weeks because Judge Sporkin loved the illustration as well as wanted to remove heed everything from everyone (he used to live on the caput of the SEC as well as did non know anything most antitrust).
• The wholesalers attempted to portray themselves every bit only “delivery boys” alongside minimal percentages of revenues of the drug manufacture every bit a whole; they were unsophisticated players alongside no marketplace ability who were squeezed betwixt the hospitals as well as the drug manufacturers.
• The wholesalers too attempted to minimize consideration of barriers to entry yesteryear showing a celluloid of 3 people inward a warehouse.  These individuals were shown wearing blueish jeans as well as t-shirts, running about similar crazy as well as putting drugs inward a delivery truck. (They were truly running enormous enterprises on incredibly pocket-sized margins; it was an incredibly unsafe as well as risky concern to enter.)
• Within a calendar week of losing the preliminary injunction, the companies abandoned the merger, since the cost of appeal would non live on worth the create goodness of winning (much less the cost of losing).

Government’s Witnesses

• The FTC brought inward a purchaser for the troops inward Iraq, who testified how he played the wholesalers off each other inward bidding contests as well as argued that if at that topographic point were exclusively 2 wholesalers, the armed services would halt upwards paying to a greater extent than for drugs.
• Originally, at that topographic point were exclusively 2 wholesalers inward California, as well as thus the other 2 entered, thus the FTC brought inward a purchaser who testified how prices kept dropping subsequently the instant 2 entered the market.
• An independent infirmary was too  brought inward every bit a witness. The purchaser testified to the wholesalers’ convincing the infirmary to sell their warehouse as well as instead to simply rely upon the wholesalers, which locked them into dealing alongside the wholesalers.
• The final witness was an economist, who commented on all the evidence, essentially summarizing it for the estimate as well as the courtroom of appeals.
• The most rigid evidence was from Goldman Sachs, since they were truly trying to sell the bargain to investors based upon the stance of monopoly profits.

Analysis

• An efficiency written report has to live on done earlier the statement of the merger, as well as thus it needs to live on defended; otherwise it becomes impossible to fighting that at that topographic point is efficiency gains as well as that the gains are certain.

See FTC v. Cardinal Health, Inc. total illustration text

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