UNITED STATES OF AMERICA
In the Matter of
Docket No. C-3594
ORDER REOPENING AND SETTING ASIDE ORDER
On February 5, 1999, respondent Eli Lilly and Company ("Lilly") filed a Petition to Reopen and Set Aside July 28, 1995 Decision and Order ("Petition"), pursuant to Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. ' 45(b), and Section 2.51 of the Commission's Rules of Practice and Procedure, 16 C.F.R. ' 2.51. In its Petition, Lilly requests that the Commission reopen the order in Docket No. C-3594 ("Order") to relieve Lilly of its compliance obligations under the Order.1 The Petition was placed on the public record for thirty days pursuant to Section 2.51(c) of the Commission=s Rules of Practice and Procedure. The Order requires that Lilly, a pharmaceuticals manufacturer, take measures to ensure that its drugs are not given unwarranted preference over those of its competitors in the APharmacy Benefits Management Services@ (APBM Services@) that Lilly would provide after PCS Health Systems, Inc. (APCS@), a subsidiary of McKesson Corporation (AMcKesson@), became Lilly=s subsidiary. Specifically, the Order requires Lilly to cause PCS, to maintain an AOpen Formulary.@2 The Open Formulary must include any drug approved by an independent APharmacy and Therapeutics Committee,@ as prescribed by the Order. In addition, Lilly is required to cause PCS to accept all discounts, rebates or other concessions offered by Lilly=s competitors for drugs on the Open Formulary and to accurately reflect such discounts in ranking the drugs on the formulary. Another provision of the Order prohibits PCS and Lilly from sharing proprietary or other ANon-Public Information,@ such as price data, that PCS may obtain from competitors of Lilly whose drugs may be placed on a PCS formulary, or from PBM competitors of PCS that must deal with Lilly to complete their formularies. Lilly is also required to obtain the prior approval of the Commission for any exclusive distribution agreement with McKesson. The other provisions of the Order require Lilly to file annual reports respecting its compliance with the Order and provide that the Commission shall have access to specified records and officers and personnel of Lilly. The Order expires, pursuant to Paragraph X, on August 18, 2005.
On January 22, 1999, Rite Aid Corporation (ARite Aid@) acquired from Lilly 100% of the stock of PCS Holdings Corporation, which in turn owns 100% of the stock of PCS. According to Lilly, with this change, the Order no longer serves any useful purpose.3
Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. ' 45(b), provides that the Commission shall reopen an order to consider whether it should be modified if the respondent "makes a satisfactory showing that changed conditions of law or fact" so require.4 A satisfactory showing sufficient to require reopening is made when a request to reopen identifies significant changes in circumstances and shows that the changes eliminate the need for the order or make continued application of it inequitable or harmful to competition.5
The language of Section 5(b) plainly places the burden on the petitioner to make a "satisfactory showing" of changed conditions to obtain reopening of the order. The legislative history also makes clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified. The Commission "may properly decline to reopen an order if a request is merely conclusory or otherwise fails to set forth specific facts demonstrating in detail the nature of the changed conditions and the reasons why these changed conditions require the requested modification of the order."6 If the Commission determines that the petitioner has made the necessary showing, the Commission must reopen the order to consider whether modification is required and, if so, the nature and extent of the modification. The Commission is not required to reopen the order, however, if the petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one in view of the public interest in repose and the finality of Commission orders.7 However, if the Commission denies relief, it must provide a sufficient explanation of its reasons for the denial.8
Upon consideration of Lilly=s request and other information, the Commission finds, pursuant to Section 2.51 of the Commission=s Rules of Practice and Procedure, that changed conditions of fact warrant reopening and setting aside the Order. Lilly has shown that there is no need for the Order by presenting evidence of the sale by Lilly of PCS to Rite Aid and that Lilly is not in a position to control PCS. As a result of the sale, Lilly is no longer engaged in the PBM Services business which gave rise to the Order, and the Commission has no reason to believe that Lilly has any present intent to re-enter that business in the future. The Order addresses competitive concerns that arose through the vertical integration between Lilly, a pharmaceuticals manufacturer, and PCS, a PBM Services provider. Rite Aid, unlike Lilly, is not a pharmaceuticals manufacturer. Therefore, the competitive problems that prompted issuance of the Order no longer exist. Since there are no competitive concerns that would justify the need to maintain the Order, the Order should be set aside.
Accordingly, IT IS ORDERED that this matter be, and it hereby is, reopened and that the Commission's Order issued on July 28, 1995, be and it hereby is, set aside as of the effective date of this Order.
By the Commission.
Donald S. Clark
ISSUED: May 13, 1999
1. 130 F.T.C. 243 (1995). Paragraphs II.B.-II.E., and III-X are the only remaining operative paragraphs of the Order. See Order && II.B.-II.E., III-X.
2. A formulary is a list of drugs used as a guide in prescribing and dispensing pharmaceuticals to health plan beneficiaries.
3. Petition at 2; Kauffman Affidavit at & 6.
4. Section 5(b) also provides that the Commission may modify an order when, although changed circumstances would not require reopening, the Commission determines that the public interest so requires. Respondents are therefore invited in petitions to reopen to show how the public interest warrants the requested modification. Lilly has based its request upon changed conditions of fact and not the public interest standard for reopening and modifying orders.
5. Rep. No. 96-500, 96th Cong., 1st Sess. 9 (1979) (significant changes or changes causing unfair disadvantage); Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4 (unpublished) ("Hart Letter"). See also United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376-77 (9th Cir. 1992) ("A decision to reopen does not necessarily entail a decision to modify the order. Reopening may occur even where the petition itself does not plead facts requiring modification").
6. S. Rep. No. 96-500, 96th Cong., 1st Sess. 9-10 (1979); see also Rule 2.51(b) (requiring affidavits in support of petitions to reopen and modify).
7. See Federated Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality).
8. United States v. Louisiana-Pacific Corp., 754 F.2d 1445 (9th Cir. 1985).