Johnson & Johnson To Divest Cordis Neurological Products Business

Agreement Settles FTC Charges Over Acquisition

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Johnson & Johnson has agreed to divest a business that develops, among other products, the cranial shunts used in the treatment of hydrocephalus -- a potentially fatal condition affecting infants and children -- to settle Federal Trade Commission charges that its $1.8 billion acquisition of Cordis Corporation would violate federal antitrust laws and may harm competition, raise prices and reduce innovation in the market for neurological shunts.

Johnson & Johnson, a New Brunswick, New Jersey-based company, is the world's largest manufacturer of health care products for consumer, pharmaceutical and professional markets. Its wholly owned subsidiary, Johnson & Johnson Professional, Inc., is a neurology and orthopedic products business that markets neurological shunts. Cordis, which competes with Johnson & Johnson in the manufacture and sale of neurological shunts, is based in Miami Lakes, Florida.

"Mergers that affect competition in the health care field deserve special attention," said William J Baer, Director of the FTC's Bureau of Competition. "Our investigation found that the combination of Johnson & Johnson and Cordis threatened to drive up prices and discourage innovation for these products."

According to the FTC complaint detailing the charges, the Johnson & Johnson acquisition of Cordis would reduce competition in the market for neurological shunts, the medical devices used to treat hydrocephalus, by giving just two firms control of 85 percent of the market. Entry by a new firm in a timely manner would be unlikely because of difficulties in developing competitive neurological shunt designs, establishing manufacturing facilities, organizing a sales and service network and obtaining Food and Drug Administration approval.

The proposed consent agreement to settle the charges and restore competition to the market would require that Johnson & Johnson divest the Cordis Neuroscience Business to a Commission-approved buyer, within 12 months of the date the order becomes final. Pending divestiture, Johnson & Johnson would be required to hold the Cordis neuroscience assets separate from the rest of Johnson & Johnson to maintain the viability and competitiveness of the Cordis assets and to prevent erosion of its business.

If Johnson & Johnson is unable to divest the Cordis Neuroscience business within 12 months, the Commission may appoint a trustee to sell the assets.

The Commission vote to accept the proposed consent agreement for public comment was 5-0. It will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

Copies of the complaint, consent and an analysis to assist the public in commenting are available from the FTC?s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at:


(FTC File No. 961 0014)

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