Settlement Preserves Competition and Marks Largest Drug Divestiture Order in a Pharmaceutical Merger Case
Teva Pharmaceutical Industries Ltd. has agreed to sell the rights and assets related to 79 pharmaceutical products to settle FTC charges that its proposed $40.5 billion acquisition of Allergan plc’s generic pharmaceutical business would be anticompetitive. The remedy requires Teva to divest the drug portfolio to eleven firms, and marks the largest drug divestiture order in an FTC pharmaceutical merger case.
The FTC order will preserve competition in U.S. pharmaceutical markets where Teva and Allergan compete now or would likely have competed in the future if not for the merger. The divested products include anesthetics, antibiotics, weight loss drugs, oral contraceptives, and treatments for a wide variety of diseases and conditions, including ADHD, allergies, arthritis, cancers, diabetes, high blood pressure, high cholesterol, mental illnesses, opioid dependence, pain, Parkinson’s disease, and respiratory, skin and sleep disorders.
“Millions of Americans rely daily on generic drugs to treat a wide range of illnesses,” said Debbie Feinstein, Director of the FTC’s Bureau of Competition. “The FTC’s settlement safeguards the competitive availability of these medications for patients across the country who depend on them.”
As explained in its Statement, the Commission also evaluated whether this transaction would have anticompetitive effects beyond those occurring in individual product markets, but concluded that the evidence showed it was unlikely to do so. Specifically, the Commission considered whether the transaction would lower incentives to develop or bring new generic drugs to market, as well as whether the combined company’s ability to bundle products could have an anticompetitive effect.
The acquirers of the divested products are Mayne Pharma Group Ltd., Impax Laboratories, Inc., Dr. Reddy’s Laboratories Ltd., Sagent Pharmaceuticals, Inc., Cipla Limited, Zydus Worldwide DMCC, Mikah Pharma LLC, Perrigo Pharma International D.A.C., Aurobindo Pharma USA, Inc., Prasco LLC and 3M Company.
Teva and Allergan must divest the drug products no later than 10 days after the acquisition is complete, and to help ensure that the order achieves its remedial goals, they are required to provide technical assistance and other transitional services to ensure that the acquirers can independently manufacture and sell the divested products. The FTC order includes an asset maintenance order and enables the Commission to appoint two interim monitors.
In addition to the product divestitures, to address the anticompetitive effects likely to arise in markets for 15 pharmaceutical products where Teva supplies active pharmaceutical ingredients to current or future Allergan competitors, the FTC order additionally requires Teva to offer these existing API customers the option of entering into long-term API supply contracts. This option ensures that these customers have access to essential API inputs and provides them sufficient time to qualify alternative suppliers if they choose to do so.
Further details about the complaint and the proposed consent order are set forth in the analysis to aid public comment for this matter.
Israel-based Teva, a global manufacturer of generic and branded pharmaceuticals, is the largest generic pharmaceutical producer in the world. Allergan is also a global producer of generic, branded and over-the-counter pharmaceuticals, and the third largest generic in the U.S.
Commission staff and the staff of antitrust agencies in the European Union, Canada, Israel, and Mexico worked cooperatively on this investigation.
The Commission votes to issue the complaint and accept the proposed consent order for public comment, and to approve the Commission Statement were both 3-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through August 29, 2016, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $40,000 per day.
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