PCC approves GSK acquisition of Pfizer business

MANILA, Philippines — The Philippine Competition Commission (PCC) has approved the acquisition by GlaxoSmithKline Consumer Healthcare Holdings Ltd. (GSK CH) of Pfizer Inc.’s consumer healthcare business covering over-the-counter medicine portfolio.

PCC said it is allowing the transaction to proceed as 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.

Earlier, the PCC extended its preliminary review to Phase 2 to have a more detailed look into the deal’s impact on the competition.

In its review, the PCC looked at how the combined stake of the merged firm may exercise market power by increasing prices of medicines where they used to compete in, and the possibility of how similar products present in both firms might become less active or be pulled out from the market once both entities merged.

The merger between GSK and Pfizer’s over-the-counter portfolio shows overlaps between GSK and Pfizer brands.

In particular, in adult cough medicines, GSK owns expectorant Ambrolex, while Pfizer owns Robitussin.

For children’s cough medicines, GSK has Ambrolex and Pfizer has Robikids.

For children’s analgesics (painkillers), GSK has Calpol and Voltaren, while Pfizer has Advil Suspension for kids.

Still, PCC gave its approval for the transaction because while the merged firms will gain ability to exercise market power, there is limited incentive for them 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 PCC said.

In addition, the PCC found that the merged firm would have limited incentive to reduce innovation of new products since there are other market players.

PCC also said there is no significant change in the merged entity’s respective market positions given competitive constraint from other market participants.

Even as both GSK and Pfizer’s portfolios include a full range of medicines, PCC said the merged firm is unlikely to tie and bundle over-the-counter products with prescription products due to the functional differences in business model of the parties.

PCC said conditions facilitating coordination among competitors in the identified markets are not likely to change significantly after the transaction, and cannot conclusively be found to have cartel-like effects.

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

Under the transaction, GSK will issue Pfizer with non-controlling shares representing 32 percent ownership interest in GSK CH.

When the deal is completed, GSK will have 68 percent ownership and control over GSK CH.