The FTC's latest pharma enforcement action shows that even modest market overlaps in generics can attract significant antitrust scrutiny.

The Federal Trade Commission has conditioned its clearance of Aurobindo Pharma's US$250 million acquisition of Lannett Company on the divestiture of four generic pharmaceutical products. The settlement, announced on June 18, 2026, reflects (1) continued antitrust scrutiny of healthcare & life sciences transactions, (2) a continued willingness by the agencies to resolve merger investigations through remedies (albeit nearly eleven months after the definitive agreement was signed), and (3) a particularly aggressive enforcement posture given the focus on generic products and the relatively competitive markets in which some of the divestitures are required.

The Transaction

On July 30, 2025, Aurobindo Pharma Ltd, through its US subsidiary Aurobindo Pharma USA, Inc., agreed to acquire Lannett Company, Inc. in a transaction valued at approximately US$250 million. As part of the acquisition, Aurobindo will acquire Lannett's commercial portfolio, research and development pipeline programs, contract manufacturing business, and US-based generic pharmaceutical manufacturing capabilities.

The FTC's Competitive Concerns

The FTC's complaint alleges that the acquisition, if consummated, would violate Section 7 of the Clayton Act and Section 5 of the FTC Act by eliminating head-to-head competition between Aurobindo and Lannett in four relevant generic pharmaceutical markets:

• The market for generic mycophenolate mofetil oral suspension (an immunosuppressant used to prevent organ transplant rejection). Notably, the FTC identified six companies currently operating in the market, with Lannett operating as one of the three largest manufacturers in the space. Aurobindo, which entered the market in 2025, was identified as the fourth largest competitor with a rapidly gaining share.

• The market for generic niacin extended release tablets (used to manage cholesterol levels and to prevent niacin deficiency). Similarly, the FTC described the market as a six-competitor market, in which both merging parties were among the four largest manufacturers.  The FTC also identified Aurobindo as the leading supplier of 500mg tablets.

• The market for generic rabeprazole sodium delayed release tablets (a proton pump inhibitor used to treat duodenal ulcers, gastroesophageal reflux disease, and Zollinger-Ellison syndrome).  Here, the FTC identified five competitor firms in the market, with the merging parties each holding a share of at least 20%.

• The market for pilocarpine tablets market (used to treat dry mouth, often after radiation therapy for head and neck cancer or in patients with Sjögren’s syndrome, which is an autoimmune disease causing the immune system to attack moisture-producing glands).  Here, the FTC alleged Lannett holds a market share in excess of 80% for both the 5 mg and 7.5 mg  tablet. While six other companies supply the 5 mg tablets, the FTC alleged that only the merging parties offer a 7.5 mg tablet.

In each market, the FTC alleged that the combination would meaningfully increase the risk that Aurobindo would be able to unilaterally exercise market power through the acquisition, that the remaining competitors would be more likely to engage in collusive or coordinated behavior, and that customers would be forced to pay higher prices.

The Remedy

The proposed consent order requires Aurobindo and Lannett to divest all rights and assets related to the four products to Quagen Pharmaceuticals Inc., an experienced generic pharmaceutical company with significant manufacturing capability and experience marketing and distributing a variety of generic drugs. The divestitures must be completed no later than ten days after the acquisition is consummated.

The consent order also requires Aurobindo and Lannett to provide transition services to enable Quagen to operate the divested assets effectively from the outset, and both parties will be subject to a compliance monitor. 

Implications for Pharmaceutical M&A

Several practical points emerge for future transactions among manufacturers in the generic pharmaceuticals space:

• Even in markets where there are several competing generics, a combination of two generic competitors may still face significant scrutiny, particularly where there are fewer competitors that manufacture specific dosages.

• Merging parties also may face antitrust scrutiny where their combined share is relatively low.  Here, the FTC did not allege specific market shares for the parties in three of four relevant markets. In the one market for which the FTC alleged market shares, it alleged the parties each had greater than 20% share. In prior enforcement actions, the FTC has challenged transactions where the parties' combined shares would be as low as 28%. 

• Even where a party has recently entered with a new generic product, the FTC may view the entrant's sales trajectory a significant factor in evaluating the extent to which the transaction may reduce competition.

Identifying acceptable divestiture buyers with relevant experience is critical to presenting an adequate divestiture package that may get a transaction to closing sooner. Here, the FTC described the divestiture buyer, Quagen, as a smaller company but noted that it has manufacturing and marketing experience in the generics space, making it an effective replacement to any competition eliminated through the transaction.