FTC Intervenes in Teva Pharmaceutical Industries' Proposed $8.9 Billion Acquisition of Barr Pharmaceuticals

Consent Order Requires Divestitures in Twenty-Nine U.S. Generic Drug Markets

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Teva Pharmaceuticals Industries Ltd.’s has settled Federal Trade Commission charges that its proposed $8.9 billion acquisition of rival generic drugmaker Barr Pharmaceuticals Inc. would be anticompetitive and violate federal law. The consent order requires Teva and Barr to sell assets in 29 U.S. markets, including generic drugs commonly used to treat acid reflux disease, various types of cancer, bacterial infections, diabetes, and depression. The rights to manufacture and market the drugs will be divided between Watson Pharmaceuticals and Qualitest Pharmaceuticals, both of which already are competitors in other generic drug markets.

“Teva and Barr are direct and significant competitors for a large number of generic drugs that many Americans use on a daily basis,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The Commission’s action taken today will ensure that the markets for these vital drugs remain competitive and consumers are not forced to pay higher prices, or even forego treatment, as a result of this deal.”

According to the Commission’s complaint, Teva’s acquisition of Barr as proposed would violate federal law by lessening competition in each of the following U.S. generic drug markets: 1) tetracycline hydrochloride (HCl) capsules; 2) chlorzoxazone tablets; 3) desmopressin acetate tablets; 4) metoclopramide HCl tablets; 5) carboplatin injection; 6) tamoxifen citrate tablets; 7) metronidazole tablets; 8) trazodone HCl tablets; 9) glipizide/metformin HCl tablets; 10) cyclosporine liquid; 11) cyclosporine capsules; 12) flutamide capsules; 13) mirtazapine orally disintegrating tablets (ODT) ; 14) deferoxamine injection; 15) epoprostenol sodium (freeze-dried powder) injection (epop); 16) weekly fluoxetine capsules; and 17) 13 generic oral contraceptive markets.

The Commission contends that the proposed transaction would eliminate one of up to four competitors in each of the relevant markets, eliminating actual, direct, and substantialcompetition between Teva and Barr, and increasing the likelihood that consumers will pay higher prices for these generic drugs. In addition, due to the specific characteristics of the drugs at issue, firms in the market will find it easier to coordinate their pricing if the divestitures were not required. A combined Teva-Barr also could exercise unilateral market power in certain markets without the divestitures the consent order requires.

The FTC contends that entry into the market for manufacturing and selling the relevant drugs would not be timely, likely, or sufficient to counteract the anticompetitive impacts of the acquisition. It estimates that the combination of the time needed to develop new drugs and gain U.S. Food and Drug Administration (FDA) approval would typically be at least two years. Further, some of the relevant markets are relatively small and in decline, so the sales opportunities for a new entrant likely would be insufficient to warrant the time and investment needed to enter the relevant markets.

The FTC’s order is designed to remedy the anticompetitive impacts of the proposed transaction. Under the terms of the proposed consent agreement, the companies would be required to assign and divest to Watson, Teva’s rights and assets for generic: 1) chlorzoxazone tablets; 2) deferoxamine injection; 3) fluoxetine weekly capsules; 4) carboplatin injection; and 5) metronidazole tablets. The consent agreement also requires the companies to assign and divest to Watson all of Barr’s rights and assets for generic: 1) metoclopramide HCl tablets; 2) cyclosporine liquid; 3) cyclosporine capsules; 4) desmopressin acetate tablets; 5) epop; 6) flutamide capsules; 7) glipizide/metformin HCl tablets; 8) mirtazapine ODT; 9) tamoxifen citrate tablets; and 10) tetracycline HCl capsules. In addition, the companies must divest rights and assets related to trazodone HCl tablets and the 13 oral contraceptive products to Qualitest. A description of each product market, what the drug(s) treats, and the relative market shares held by Teva, Barr, and their competitors can be found in the Commission’s analysis to aid public comment on the FTC’s Web site at http://www.ftc.gov/os/caselist/0810224/index.shtm.

If the FTC determines that either Watson or Qualitest is not an acceptable acquirer of the assets to be divested, the companies must unwind the proposed sales and sell the assets to another Commission-approved buyer within six months of when the order becomes final. If they don’t meet this deadline, the FTC may appoint a trustee to oversee the assets’ sale. Finally, the order contains several provisions to ensure the assets are successfully divested, including requiring Teva and Barr to provide transitional services to enable the buyers to obtain necessary FDA approvals. The FTC also has appointed William Rahe of Quantic Regulatory Services, LLC to oversee the asset transfer and to ensure Teva and Barr comply with the terms of the order.

The Commission vote to accept the complaint and consent order and place copies on the public record was 4-0. The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The complaint, consent order, and an analysis to aid public comment can be found now on the Commission’s Web site at http://www.ftc.gov/os/caselist/0810224/index.shtm.

The agreement will be subject to public comment for 30 days, beginning today and continuing through January 19, 2009, after which the Commission will decide whether to makeit final. Comments should be addressed to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight
service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the documents related to this matter are available from the FTC's web site at http://www.ftc.gov and the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0224)

Contact Information

Mitchell J. Katz,
Office of Public Affairs
Stephanie C. Bovee,
Bureau of Competition