Compromise Rejected in Talks on Drug Company Acquisitions

U.S. District Judge Stanley Sporkin backed off efforts to broker a settlement permitting acquisitions by drug wholesalers Cardinal Health Inc. and McKesson Corp. after a government lawyer said a new company proposal fell far short of resolving antitrust problems.

Sporkin, who is hearing closing arguments over Cardinal’s $4.5 billion proposed purchase of Orange-based Bergen Brunswig Corp. and McKesson’s drive for a $3.2 billion purchase of AmeriSource Health Corp., has sought a way to allow completion of the transactions with some conditions.

Sporkin previously suggested that the companies, the nation’s four largest drug wholesalers, fund new competitors in some parts of the country. On Wednesday, McKesson lawyer William Bradford Reynolds said the companies would be willing to fund as many as five new warehouses for two years.

Federal Trade Commission lawyer Richard Parker, though, said the companies would have to pay for “north of 20” new warehouses to satisfy the FTC.

“OK, so that’s not going to work,” Sporkin said. “I thought we were making some progress.”

Reynolds said the FTC demands would cost the companies all the savings they expect to obtain through warehouse closures and other steps. “That sort of makes the whole merger program meaningless,” he said.

Sporkin’s remarks came after the market closed. AmeriSource climbed $3.75 to $71.44, and Bergen jumped $4.44 to $52. Cardinal was up 19 cents at $96.69 while McKesson rose 56 cents to $77.94.