Hospira, Inc., and Mayne Pharma Limited; Analysis of Proposed Consent Order To Aid Public Comment, 4009-4011 [E7-1291]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 72, Number 18 (Monday, January 29, 2007)]
[Notices]
[Pages 4009-4011]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1291]


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FEDERAL TRADE COMMISSION

[File No. 071 0002]


Hospira, Inc., and Mayne Pharma Limited; Analysis of Proposed 
Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before February 20, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Hospira and Mayne Pharma, File No. 071 
0002,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 135-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed 
in paper form 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. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form as part of or as an attachment to email messages 
directed to the following e-mail box: consentagreement@ftc.gov.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at https://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at https://
www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: David L. Inglefield, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2637.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for January 18, 2007), on the World Wide Web, at https://www.ftc.gov/
os/2007/01/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement

[[Page 4010]]

Containing Consent Orders (``Consent Agreement'') from Hospira Inc. 
(``Hospira'') and Mayne Pharma Ltd. (``Mayne''), which is designed to 
remedy the anticompetitive effects of Hospira's acquisition of Mayne. 
Under the terms of the Consent Agreement, the companies would be 
required to assign and divest to Barr Pharmaceuticals, Inc. (``Barr'') 
the Mayne rights and assets necessary to manufacture and market the 
following generic injectable pharmaceuticals: (1) Hydromorphone 
hydrochloride (``hydromorphone''); (2) nalbuphine hydrochloride 
(``nalbuphine''); (3) morphine sulfate (``morphine''); (4) 
preservative-free morphine; and (5) deferoxamine mesylate 
(``deferoxamine'').
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and the comments received, and will decide 
whether it should withdraw from the proposed Consent Agreement, modify 
it, or make final the Decision and Order (``Order'').
    Pursuant to a Scheme Implementation Agreement dated September 20, 
2006, Hospira intends to acquire all of the outstanding shares of Mayne 
for approximately $2 billion. Both parties manufacture and sell generic 
pharmaceuticals in the United States. The Commission's Complaint 
alleges that the proposed acquisition, if consummated, would violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 
of the FTC Act, as amended, 15 U.S.C. 45, in the markets for the 
manufacture and sale of the following generic injectables: (1) 
Hydromorphone; (2) nalbuphine; (3) morphine; (4) preservative-free 
morphine; and (5) deferoxamine (``the Products''). The proposed Consent 
Agreement remedies the alleged violations by replacing in each of these 
markets the lost competition that would result from the acquisition.

The Products and Structure of the Markets

    Hospira's proposed acquisition of Mayne would strengthen Hospira's 
position in generic injectable pharmaceuticals and provide it with a 
stronger pipeline of generic products. Injectable pharmaceuticals are 
not close substitutes for oral drugs because they are used when a 
patient is unable to ingest pills or capsules or when an immediate 
onset of action is required and the patient cannot wait for the 
treatment to pass through the gastrointestinal system. The companies 
overlap in a number of generic injectable pharmaceutical markets, and 
if consummated, the transaction likely would lead to anticompetitive 
effects in five of the overlap markets.
    The transaction would reduce the number of competing generic 
suppliers in five already concentrated markets. When the number of 
suppliers of a generic is small, the number of suppliers has a direct 
and substantial effect on generic pricing, as each additional supplier 
can have a competitive impact on the market. Because there are (or 
would be) multiple generic equivalents for each of the Products absent 
the proposed acquisition, the branded versions would not significantly 
constrain the generics' pricing.
    For one of the generic injectable products at issue, hydromorphone, 
Hospira and Mayne currently are two of only three suppliers offering 
the product. In the remaining four markets, Mayne is one of a limited 
number of suppliers capable of, and in the process of, entering these 
markets. As a result, the proposed acquisition would eliminate 
important future competition in these markets.
    Injectable hydromorphone is a narcotic opioid analgesic used to 
relieve moderate to severe pain, both acute and chronic, and is 
classified by the U.S. Drug Enforcement Administration (``DEA'') as a 
Schedule II narcotic. The branded product, Dilaudid-HP, is manufactured 
and sold by Abbott Laboratories Inc. In 2006, sales of generic 
injectable hydromorphone exceeded $39 million. Only three companies 
compete in the generic injectable hydromorphone market: Hospira, Baxter 
Healthcare Corp. (``Baxter''), and Mayne. Hospira is the market leader 
with a market share of approximately 60 percent. Mayne and Baxter are 
the only other suppliers, with market shares of 25 percent and 15 
percent, respectively. After Hospira's acquisition of Mayne, Hospira's 
market share would increase from 60 percent to approximately 85 
percent, and Baxter would be the only other competitor.
    Nalbuphine is an injectable opioid analgesic used to relieve 
moderate to severe pain in patients. Hospira currently is the only 
supplier of generic injectable nalbuphine in the United States. Mayne 
is in the process of entering this market and is one of a limited 
number of firms capable of entering this market in a timely manner. The 
proposed acquisition would eliminate Mayne's entry into the injectable 
nalbuphine market.
    Injectable morphine is a widely-used opioid analgesic for the 
treatment of moderate to severe, acute and chronic pain, and is 
classified by the DEA as a Schedule II narcotic. Hospira is the leading 
supplier of injectable morphine, and provides a full-line of 
preservative and preservative-free morphine products in various 
strengths, sizes, and delivery mechanisms. Baxter and Amphastar 
Pharmaceuticals, Inc. are the only other suppliers of injectable 
morphine in the United States. Mayne is in the process of entering this 
market and is one of a limited number of suppliers capable of entering 
this market in a timely manner. The proposed acquisition would 
eliminate Mayne's entry into the injectable morphine market. Absent the 
proposed transaction, Mayne would have been the only competitor to 
Hospira for the 50 mg/ml strength presentations of injectable morphine.
    Injectable preservative-free morphine, unlike injectable morphine, 
is used when the drug is delivered to the intrathecal or epidural space 
next to the nerves in a patient's spine. Currently, only Hospira and 
Baxter sell preservative-free morphine in the United States in the 
manner of generic suppliers. Mayne is in the process of entering this 
market and is one of a limited number of suppliers capable of entering 
this market in a timely manner. The proposed transaction would 
eliminate Mayne's entry into the injectable preservative-free morphine 
market.
    Injectable deferoxamine is an iron chelator used to treat acute 
iron poisoning or chronic iron overload. Hospira and Teva 
Pharmaceutical Industries Ltd. are the only suppliers of generic 
injectable deferoxamine in the United States. Mayne is in the process 
of entering this market and is well-positioned to enter this market in 
a timely manner. The proposed acquisition would eliminate Mayne's entry 
into the injectable deferoxamine market.

Entry

    Entry into the markets for the manufacture and sale of the Products 
would not be timely, likely, or sufficient in its magnitude, character, 
and scope to deter or counteract the anticompetitive effects of the 
acquisition. Developing and obtaining U.S. Food and Drug Administration 
(``FDA'') approval for the manufacture and sale of each of the Products 
takes at least two (2) years due to substantial regulatory, 
technological, and intellectual property barriers.

[[Page 4011]]

Effects of the Acquisition

    The proposed acquisition would cause significant anticompetitive 
harm to consumers in the U.S. markets for the manufacture and sale of 
generic injectable hydromorphone, generic injectable nalbuphine, 
generic injectable morphine, generic injectable preservative-free 
morphine, and generic injectable deferoxamine. In generic 
pharmaceutical markets, pricing is heavily influenced by the number of 
competitors that participate in a given market. Here, the evidence 
shows that, given the small number of suppliers, the prices of the 
generic pharmaceutical product at issue decrease with the entry of each 
additional competitor. Evidence gathered during our investigation 
indicates that anticompetitive effects--whether unilateral or 
coordinated--are likely to result from the decrease in the number of 
independent competitors in the markets at issue that would be a 
consequence of the proposed acquisition.
    In the market for generic injectable hydromorphone, the proposed 
acquisition would leave only two current competitors: The combined firm 
and one other company. The evidence indicates that the presence of 
three independent competitors in these markets allows customers to 
negotiate lower prices, and that a reduction in the number of 
competitors would allow the merged entity and the other market 
participant(s) to raise prices.
    The competitive concerns in the market for generic injectable 
hydromorphone can be characterized as both unilateral and coordinated 
in nature. Certain conditions in the relevant market may reduce the 
ability of suppliers to reach and maintain an agreement on price. For 
example, bids to GPOs typically specify prices and rebates for an array 
of drugs and presentations, and there are long term contracts. 
Nevertheless, the weight of the evidence leads to the conclusion that 
the transaction will increase the likelihood of coordination. The 
transparency of awards by GPOs makes coordination among the suppliers, 
especially customer allocation, more likely to occur, because deviation 
from an agreement would be relatively easy to detect. Also, the fact 
that there will be only two suppliers after the proposed acquisition is 
an important consideration in evaluating the likelihood of 
coordination.
    The impact that a reduction in the number of firms would have on 
pricing can also be explained in terms of unilateral effects. With 
fewer bidders, the probability of winning a given bid is higher and the 
incentives to bid aggressively are lower. With transactions that lead 
to a significant decrease in the number of bidders for a given drug, 
such as the instant one, a significant increase in the price charged to 
customers is likely to result. Such effects are likely to be 
particularly large in the market for generic injectable hydromorphone, 
where there would be only two competitors after Hospira's acquisition 
of Mayne.
    The proposed acquisition also would cause significant 
anticompetitive harm to consumers by eliminating potential competition 
between Hospira and Mayne in the markets for the manufacture and sale 
of generic injectable nalbuphine, generic injectable morphine, generic 
injectable preservative-free morphine, and generic injectable 
deferoxamine. In each of these markets, there are no more than three 
current suppliers, and Mayne is poised to enter in the near future. 
Mayne's independent entry into these markets would likely result in 
lower prices. The proposed transaction would eliminate that independent 
entry, and hence would leave prices at levels that are higher than 
would prevail absent the acquisition.

The Consent Agreement

    The proposed Consent Agreement effectively remedies the proposed 
acquisition's anticompetitive effects in the relevant product markets. 
Pursuant to the Consent Agreement, Hospira and Mayne are required to 
divest certain rights and assets related to the relevant products to a 
Commission-approved acquirer no later than ten (10) days after the 
acquisition. Specifically, the proposed Consent Agreement requires that 
the parties assign and divest all of the Mayne rights and assets for 
the Products to Barr.
    The acquirers of the divested assets must receive the prior 
approval of the Commission. The Commission's goal in evaluating 
possible purchasers of divested assets is to maintain the competitive 
environment that existed prior to the acquisition. A proposed acquirer 
of divested assets must not itself present competitive problems.
    Barr is a reputable generic injectable pharmaceutical manufacturer 
and is well-positioned to compete effectively in each of the relevant 
product markets. Following its recent acquisition of Pliva d.d., Barr 
markets several injectable pharmaceutical products in the United States 
and has multiple manufacturing facilities, an established sales 
organization, FDA and DEA regulatory expertise, and a robust injectable 
product pipeline. Moreover, Barr will not present competitive problems 
in any of the markets in which it will acquire a divested asset because 
it currently does not compete in those markets. With its resources, 
capabilities, and good reputation, Barr is well-positioned to replicate 
the competition that would be lost with the proposed acquisition.
    If the Commission determines that Barr is not an acceptable 
acquirer of the assets to be divested, or that the manner of the 
divestitures to Barr is not acceptable, the parties must unwind the 
sale and divest the Products within six (6) months of the date the 
Order becomes final to another Commission-approved acquirer. If the 
parties fail to divest within six (6) months, the Commission may 
appoint a trustee to divest the Product assets.
    The proposed remedy contains several provisions to ensure that the 
divestitures are successful. The Order requires Hospira and Mayne to 
provide transitional services to enable the Commission-approved 
acquirers to obtain all of the necessary approvals from the FDA. These 
transitional services include technology transfer assistance to 
manufacture the Products in substantially the same manner and quality 
employed or achieved by Hospira and Mayne.
    The Commission has appointed R. Owen Richards of Quantic Regulatory 
Services, LLC (``Quantic'') to oversee the asset transfer and to ensure 
Hospira and Mayne's compliance with all of the provisions of the 
proposed Consent Agreement. Mr. Richards is President of Quantic and 
has several years of experience in the pharmaceutical industry. He is a 
highly-qualified expert on FDA regulatory matters and currently advises 
Quantic clients on achieving satisfactory regulatory compliance and 
interfacing with the FDA. In order to ensure that the Commission 
remains informed about the status of the proposed divestitures and the 
transfers of assets, the proposed Consent Agreement requires Hospira 
and Mayne to file reports with the Commission periodically until the 
divestitures and transfers are accomplished.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
 [FR Doc. E7-1291 Filed 1-26-07; 8:45 am]
BILLING CODE 6750-01-P