Pfizer Inc. and Wyeth; Analysis of Agreement Containing Consent Order To Aid Public Comment and Statement of the Federal Trade Commission, 62310-62315 [E9-28336]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 74, Number 227 (Friday, November 27, 2009)]
[Notices]
[Pages 62310-62315]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-28336]


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FEDERAL TRADE COMMISSION

[File No. 091 0053]


Pfizer Inc. and Wyeth; Analysis of Agreement Containing Consent 
Order To Aid Public Comment and Statement of the Federal Trade 
Commission

AGENCY: Federal Trade Commission.

ACTION: Notice of acceptance of 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 complaint and 
the terms of the consent order--embodied in the consent agreement--that 
settle these allegations.

ADDRESSES: Copies of the Statement of the Commission, the Agreement 
Containing Consent Orders, the Decision and Order (Redacted Public 
Version), the Order To Maintain Assets, the Complaint, the Analysis To 
Aid Public Comment, and other materials may be found on the Federal 
Trade Commission Web site, at https://www.ftc.gov/os/caselist/0910053/index.shtm, and may also be secured from the following address: Federal 
Trade Commission, Consumer Response Center, Public Reference Room, Room 
H-130, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Michael R. Moiseyev, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3106.

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 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 October 14, 2009), on the World Wide Web, at https://www.ftc.gov/opa/2009/10/pfizer.shtm. 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.

Analysis of Proposed Agreement Containing Consent Orders To Aid Public 
Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') with Pfizer Inc. (``Pfizer''), which is designed to remedy 
the anticompetitive effects of its proposed acquisition of Wyeth. Under 
the terms of the Consent Agreement, Pfizer must divest to Boehringer 
Ingelheim Vetmedica, Inc. (``BI'') Wyeth's U.S. animal health business 
(``Fort Dodge'') in all areas of overlap, except for equine tapeworm 
parasiticides and equine herpesvirus vaccines. In the area of equine 
tapeworm parasiticides, the consent order requires Pfizer to return to 
Virbac S.A. (``Virbac'') Pfizer's exclusive distribution rights for 
these products. In the area of equine herpesvirus vaccines, Pfizer is 
ordered to divest to BI Pfizer's equine herpesvirus products. The 
assets for each of the divestitures include all of the relevant 
intellectual property, customer lists, research and development 
information, and regulatory materials, as well as two of Fort Dodge's 
three U.S. manufacturing facilities. These divestitures fully preserve 
the competition that the proposed acquisition would otherwise 
eliminate.
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the proposed 
Consent Agreement and the comments received to decide whether it should 
withdraw from the proposed Consent Agreement, modify it, or make final 
the accompanying Decision and Order (``Order'').
    Pursuant to an Agreement and Plan of Merger dated as of January 25, 
2009, Pfizer proposes to acquire all of the issued and outstanding 
shares of Wyeth, whereby each outstanding share of Wyeth common stock 
will be converted into the right to receive $33 in cash and 0.985 share 
of Pfizer common stock. Both parties manufacture human and animal 
health biological and pharmaceutical products. The combined firm would 
have projected worldwide revenues of almost $72 billion. 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 Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, in U.S. markets for the manufacture and sale of: 
(1) Killed cattle respiratory vaccines; (2) modified-live cattle 
respiratory vaccines; (3) cattle reproductive vaccines; (4) cattle 
pasteurella vaccines; (5) lactating-cow mastitis treatments; (6) dry-
cow mastitis treatments; (7) dairy cattle broad-spectrum antibiotics 
with low milk-withholding times; (8) cattle macrocyclic lactone 
parasiticides; (9) cattle benzimidazole parasiticides; (10) canine 
combination vaccines; (11) canine monovalent parvovirus vaccines; (12) 
canine monovalent coronavirus vaccines; (13) canine monovalent 
leptospira vaccines; (14) canine bordetella vaccines; (15) feline 
combination vaccines; (16) feline leukemia vaccines; (17) companion 
animal rabies vaccines; (18) companion animal cephalosporin 
antibiotics; (19) equine tapeworm parasiticides containing 
praziquantel; (20) equine herpesvirus vaccines; and (21) equine joint-
injected steroids. The proposed Consent Agreement remedies the alleged 
violations by replacing in each of the relevant markets the lost

[[Page 62311]]

competition that would result from the acquisition.

II. The Products and Structure of the Markets

    The proposed acquisition of Wyeth by Pfizer would combine two of 
the largest animal health suppliers in the United States. The companies 
overlap in several animal health markets, and, if consummated, the 
transaction likely would lead to anticompetitive effects in each of the 
relevant markets. More specifically, the transaction would decrease the 
number of competing suppliers in the overlap markets, which number has 
a direct and substantial effect on the prices of animal health 
products. The evidence shows that customers are able to obtain lower 
prices by threatening to switch to another supplier or presenting the 
incumbent supplier with a rival's lower offer. Customers have stated 
that they generally can negotiate lower prices in markets with more 
participants and that, historically, they have seen prices rise in 
markets in which the number of market participants has declined.
    Pfizer and Fort Dodge are the market leaders in the area of cattle 
health products. After the transaction, Pfizer would have over 60 
percent of several of the relevant cattle product markets. In the 
cattle vaccines area, Pfizer and Fort Dodge have broad and 
significantly overlapping portfolios of respiratory, reproductive, and 
pasteurella vaccines. Customers choose the specific vaccine products 
that most closely match their needs based on several factors, 
including, among others, disease risk assessments and relative prices.
    Killed cattle respiratory vaccines prevent respiratory diseases in 
pregnant cattle without the risk of causing abortion. Pfizer and Fort 
Dodge account for over 50 percent of all killed respiratory vaccine 
sales in the United States. The most commonly used killed respiratory 
vaccine is the 5-way vaccine, which prevents infectious bovine 
rhinotracheitis, types 1 and 2 of bovine virus diarrhea, parainfluenza 
3, and bovine respiratory syncytial virus. As a result of the 
acquisition, Pfizer would have 61 percent of the market for killed 5-
way respiratory vaccines, leaving Novartis Animal Health (``Novartis'') 
as Pfizer's only significant competitor.
    Modified-live cattle respiratory vaccines prevent the same diseases 
as killed respiratory vaccines, but contain modified-live rather than 
killed antigens to stimulate greater protection. Because modified-live 
respiratory vaccines induce stronger immunities, most customers will 
use modified-live vaccines for non-pregnant cattle. Pfizer and Fort 
Dodge account for over 53 percent of all modified-live respiratory 
vaccine sales in the United States. As with killed respiratory 
vaccines, the 5-way modified-live respiratory vaccine is the most 
commonly used modified-live cattle respiratory vaccine. As a result of 
the proposed acquisition, Pfizer would control over 68 percent of the 
5-way modified-live respiratory vaccine market.
    Cattle reproductive vaccines are used to prevent early- and late-
stage abortions in pregnant cattle. The markets for cattle reproductive 
vaccines include, most significantly: (1) The market for modified-live 
10-way vaccines, which contain modified-live viral respiratory and 
Leptospira antigens; (2) the market for killed 10-way vaccines, which 
contain killed viral respiratory and Leptospira antigens; and (3) the 
market for lepto/vibrio vaccines, which contain Leptospira and 
Campylobacter fetus antigens. After the acquisition, Pfizer would have 
83 percent of the $13 million modified-live 10-way market in the United 
States, with Intervet/Schering-Plough Animal Health (``ISP''), 
AgriLaboratories, Ltd. (``AgriLabs''), and BI accounting for 11 
percent, 4 percent, and 2 percent, respectively. Pfizer also would 
control 76 percent of sales in killed 10-way vaccines, leaving Novartis 
with 18 percent and AgriLabs with 6 percent of this $9 million market. 
Finally, in the lepto/vibrio vaccine market, Pfizer and Fort Dodge 
collectively account for almost 39 percent of this $2.6 million market, 
and Novartis leads with 41 percent.
    Cattle pasteurella vaccines are used to prevent pneumonia as well 
as lesser respiratory infections in cows caused by Pasteurella 
multocida and Mannheimia haemolytica bacteria. Pfizer, Fort Dodge, BI, 
ISP, and Merial are the only significant suppliers of products in these 
markets in the United States. The proposed acquisition would reduce the 
number of competitors in these markets, leaving Pfizer significantly 
larger than any of its remaining competitors.
    Lactating-cow and dry-cow mastitis treatments are used to treat 
infections of the udder that occur during either lactation or the dry 
period between pregnancies. The markets for lactating-cow and dry-cow 
mastitis treatments are highly concentrated, with Pfizer and Fort Dodge 
together accounting for more than 90 percent of sales in each of these 
markets.
    Broad-spectrum antibiotic products with low milk-withholding times 
can be used to treat a large variety of infections that affect dairy 
cows.\1\ Pfizer's products are considered the most effective 
antibiotics for dairy cows and have a zero-day withholding period, 
while Fort Dodge's product has a low withholding period of two to four 
days. A generic version of one of Pfizer's products was recently 
introduced. As a result of the proposed acquisition, Pfizer would have 
a near monopoly in this $162 million market.
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    \1\ To ensure that antibiotic-contaminated milk is not 
distributed, the United States Food and Drug Administration 
(``FDA'') has set ``withholding times'' for each antibiotic product 
and mandates that any milk that is produced during the withholding 
period be discarded. A principal consideration for dairy farmers in 
purchasing antibiotics, therefore, is how quickly they can resume 
milk production after treatment.
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    Cattle macrocyclic lactone parasiticides are the newest and most 
effective class of cattle parasiticides in the United States. They are 
effective against both internal and external parasites. There are only 
three branded players in the $118 million U.S. market: Pfizer, Fort 
Dodge, and Merial. Although generic versions of Merial's product are 
available, there are no generic versions of Pfizer's or Fort Dodge's 
products currently on the market. The proposed acquisition would 
significantly increase the concentration in this market, leaving Pfizer 
with approximately 42 percent of the market.
    Cattle benzimidazole parasiticides are an older generation of 
parasiticides used primarily by cattle breeders to treat internal 
parasites, such as lungworms, tapeworms, and liver flukes. Pfizer, Fort 
Dodge, and ISP are the only suppliers to offer cattle benzimidazole 
parasiticides in the United States. After the proposed acquisition, ISP 
would be the only remaining constraint on Pfizer's ability to raise 
prices, accounting for 67 percent of this $16 million market. Pfizer 
would control the remaining 33 percent of the market.
    Beyond cattle health products, Pfizer and Fort Dodge are also two 
of only four major suppliers in the relevant companion animal vaccines 
and pharmaceuticals markets. In the majority of these markets, the 
transaction would reduce the number of competitors from four to three 
and give Pfizer between 50 and 100 percent of the market. As in the 
cattle vaccines area, Pfizer and Fort Dodge have broad and 
significantly overlapping portfolios of companion animal vaccines. 
Customers can choose the specific vaccine products that most closely 
match their needs based on several factors, including, among others, 
vaccination protocols recommended by

[[Page 62312]]

veterinarians and disease risk assessments.
    Canine combination vaccines prevent common canine diseases, such as 
those caused by canine distemper, adenovirus (types 1 and 2), 
parainfluenza, parvovirus, coronavirus, and Leptospira. Pfizer, Fort 
Dodge, Merial, and ISP are the four significant companies that supply 
canine combination vaccines in the United States. Total U.S. sales of 
canine combination vaccines are $126 million. The proposed acquisition 
would reduce the number of significant suppliers of canine combination 
vaccines from four to three.
    While parvovirus, coronavirus, and leptospira vaccines are all 
available as part of canine combination vaccines, the monovalent forms 
are administered as booster shots for puppies that have a particularly 
high risk of exposure to the disease. Pfizer, Fort Dodge, Merial, and 
ISP are the only four companies that supply canine monovalent 
parvovirus vaccines in the United States, a $2.1 million market. The 
proposed acquisition would give Pfizer control of 66 percent of the 
canine monovalent parvovirus vaccine market.
    The same four players-Pfizer, Fort Dodge, Merial, and ISP-are also 
the only four companies that supply canine monovalent coronavirus 
vaccines in the United States. The proposed acquisition would further 
entrench Pfizer as the dominant supplier with an 81 percent share of 
the $2.3 million market for canine monovalent coronavirus vaccines.
    In the market for canine monovalent leptospira vaccines, the 
proposed acquisition would combine the only two companies that 
currently supply such vaccines in the United States. Pfizer currently 
has a 53 percent share, and Fort Dodge controls the remaining 47 
percent of this $9.2 million market. The proposed acquisition would 
grant Pfizer complete control over the market for canine monovalent 
leptospira vaccines.
    Canine bordetella vaccines are used primarily to prevent infectious 
tracheobronchitis, which is the most prevalent upper respiratory 
infection contracted by dogs in the United States. There are five 
suppliers of canine bordetella vaccines in the United States: Pfizer, 
Fort Dodge, ISP, Merial, and BI. Total U.S. sales of canine bordetella 
vaccines amount to $53.3 million. The proposed acquisition would reduce 
the number of suppliers of canine bordetella vaccines from five to 
four, leaving Pfizer significantly larger than its three remaining 
competitors.
    Feline combination vaccines are used to prevent common feline 
diseases, such as feline panleukopenia, rhinotracheitis, chlamydia, and 
calicivirus. Pfizer, Fort Dodge, ISP, and Merial are the only 
significant suppliers of feline combination vaccines in the United 
States. Total U.S. sales of feline combination vaccines are $28 
million. The proposed acquisition would reduce the number of 
significant suppliers of feline combination vaccines from four to 
three, with Pfizer's sales considerably greater than those of its two 
remaining competitors.
    Feline leukemia vaccines can provide effective protection against 
feline leukemia, a fatal disease that breaks down a cat's immune system 
to such an extent that it can no longer defend against otherwise 
harmless invasions by bacteria, viruses, or other sources of disease. 
Pfizer, Fort Dodge, Merial, and ISP are the only companies that supply 
feline leukemia vaccines in the United States, sales of which are $38 
million. The proposed acquisition would reduce the number of suppliers 
from four to three, with Pfizer significantly larger than its two 
remaining competitors.
    Companion animal rabies vaccines are used to prevent rabies, a 
fatal and incurable neurological disease. Pfizer, Fort Dodge, Merial, 
and ISP are the only companies that offer companion animal rabies 
vaccines in the United States. U.S. sales of such vaccines total 
approximately $60 million, and the proposed acquisition would reduce 
the number of suppliers of companion animal rabies vaccines from four 
to three.
    Companion animal cephalosporins are a recent generation of broad-
spectrum antibiotics that are effective against both gram-positive and 
gram-negative organisms and can be used to treat a wide range of 
infections. Pfizer and Fort Dodge are the only two suppliers of branded 
companion animal cephalosporins in the United States. The only other 
companion animal cephalosporins are generic human and animal 
cephalosporin products. These products, however, have limited 
competitive significance because of dosing differences found in the 
generic human products and a relative lack of technical and research 
support offered with the generic animal products. As a result of the 
proposed acquisition, Pfizer would have 70 percent of this $52 million 
market.
    In addition to cattle and companion animal products, the proposed 
acquisition also poses competitive concerns in three equine product 
markets: tapeworm parasiticides; herpesvirus vaccines; and joint-
injected steroids. The market for equine tapeworm parasiticides 
containing praziquantel consists of products used to treat tapeworms 
and other internal parasites, which are the leading cause of equine 
colic in the United States. Currently, Pfizer has a 33 percent share of 
this approximately $22 million market; Fort Dodge has a 31 percent 
market share; and Merial has a 36 percent market share. The proposed 
acquisition would give Pfizer 64 percent of the market for equine 
tapeworm parasiticides, leaving Merial as its only remaining 
competitor.
    Equine herpesvirus vaccines are used primarily for the prevention 
of equine rhinopneumonitis, an upper respiratory disease, which can 
cause abortion in pregnant mares. Pfizer, Fort Dodge, ISP, and BI are 
the only suppliers of equine herpesvirus vaccines in the United States, 
sales of which total $30 million. The proposed acquisition would reduce 
the number of suppliers from four to three, with Pfizer significantly 
larger than its two remaining competitors.
    Equine joint-injected steroids can be used to reduce joint 
inflammation, treat osteoporosis, and prevent lameness in horses. 
Pfizer has a 60 percent share of this $7.3 million market, while Fort 
Dodge has a 40 percent share. The proposed acquisition would create a 
monopoly in the market for equine joint-injected steroids in the United 
States.

III. Entry

    Entry into the manufacture and sale of the relevant animal health 
vaccine and pharmaceutical markets would not be timely, likely, or 
sufficient in its magnitude, character, or scope to deter or counteract 
the anticompetitive effects of the proposed acquisition. Developing and 
obtaining United States Department of Agriculture approval (in the case 
of vaccines) for the manufacture and sale of each of the relevant 
products can take as many as five years due to substantial regulatory, 
technological, and intellectual property barriers. Similarly, obtaining 
FDA approval (in the case of pharmaceutical products) can take five to 
seven years for a currently developed product and as many as ten or 
more years for an entirely new product.
    In addition to the regulatory, developmental, and manufacturing 
hurdles facing a potential entrant, many of the markets at issue are 
characterized by particular conditions that make new entry unlikely. 
For example, some products, such as vaccines for cattle, equine, and 
companion animals, are particularly difficult to manufacture, have 
relatively small profit opportunities, and have a high potential for 
adverse reactions and product failure. In other markets, such as those 
for companion animal vaccines, a

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substantial initial investment is necessary because veterinarians tend 
to purchase all their vaccines from a single supplier; as a result, a 
new entrant must develop a large portfolio of vaccines in order to be a 
significant competitor.

IV. Effects of the Acquisition

    The proposed acquisition would cause significant competitive harm 
to consumers in the relevant U.S. markets for cattle, companion animal, 
and equine health products by eliminating actual, direct, and 
substantial competition between Pfizer and Wyeth. The transaction would 
increase the likelihood that Pfizer will be able to unilaterally 
exercise market power, increase the likelihood of coordinated 
interaction between or among suppliers, reduce Pfizer's incentives to 
pursue further research and development, and increase the likelihood 
that consumers will pay higher prices. In each of the relevant markets, 
the evidence shows that consumers have experienced lower prices, 
increased research and development, and better service due to the 
competitive rivalry that exists between market participants--
particularly that which currently exists between Pfizer and Wyeth. The 
evidence also shows that, when any of the competitors experienced 
supply problems, the remaining competitors increased their prices, and, 
conversely, that consumers were able to negotiate lower prices when new 
rivals entered the relevant markets.

V. The Consent Agreement

    The proposed Consent Agreement preserves competition in each of the 
relevant markets alleged in the complaint by requiring that Pfizer 
divest the following assets to BI no later than ten days after the 
acquisition: All of the Fort Dodge assets relating to killed cattle 
respiratory vaccines, modified-live cattle respiratory vaccines, cattle 
reproductive vaccines, cattle pasteurella vaccines, lactating-cow and 
dry-cow mastitis treatments, dairy cattle broad-spectrum antibiotic 
products with low milk-withholding times, cattle macrocyclic lactone 
parasiticides, cattle benzimidazole parasiticides, canine combination 
vaccines, canine monovalent parvovirus vaccines, canine monovalent 
coronavirus vaccines, canine monovalent leptospira vaccines, canine 
bordetella vaccines, feline combination vaccines, feline leukemia 
vaccines, companion animal rabies vaccines, companion animal 
cephalosporins, and equine joint-injected steroids, as well as the 
Pfizer assets relating to equine herpesvirus vaccines.
    The proposed Consent Agreement contains several provisions designed 
to ensure that these divestitures are successful. Pfizer must provide 
various transitional services to enable BI to compete against Pfizer 
immediately following the acquisition, including any technical 
assistance that BI may need. Pfizer also must provide BI with the 
regulatory approvals, brand names, marketing materials, customer 
contracts, and other assets associated with marketing and selling the 
divested products in the United States.
    BI is a reputable supplier of animal health products and is well 
positioned to manufacture and market the divested assets and to compete 
effectively in the relevant markets. In the United States, BI's animal 
health revenues totaled approximately $215 million in 2008. Moreover, 
the acquisition by BI does not present competitive problems in any of 
the relevant markets because it currently has either a very limited 
presence or no presence at all in each of those areas. With its 
resources, capabilities, and experience marketing animal and human 
health products, BI is well placed to replicate the competition that 
would be lost with the proposed acquisition.
    The proposed Consent Agreement also preserves the existing 
competition in the equine tapeworm parasiticides market by requiring 
Pfizer to return to Virbac Pfizer's distribution rights for the 
relevant parasiticide products no later than ten days after the 
acquisition. In 2000, Virbac entered into a 15-year licensing agreement 
with Pfizer, under which Virbac grants Pfizer exclusive distribution 
rights to market and sell the equine tapeworm parasiticide products in 
the United States. Virbac is particularly well suited to acquire these 
assets because it currently manufactures the products and has the 
resources, technical capabilities, and experience to be successful in 
restoring the competition that would be lost if the proposed Pfizer/
Wyeth transaction were to proceed unremedied.
    If the Commission determines that either BI or Virbac is not an 
acceptable acquirer of the assets to be divested, or that the manner of 
the divestitures is not acceptable, Pfizer must unwind the sale(s) and 
divest the assets within six months of the date the Order becomes final 
to another Commission-approved acquirer. If Pfizer fails to divest 
within the six months, the Commission may appoint a trustee to divest 
the relevant assets.
    The proposed remedy also allows for the appointment of an Interim 
Trustee, experienced in obtaining regulatory approval and the 
manufacture of biologics, to oversee the required technology transfers. 
As part of the proposed remedy, Pfizer is required to execute an 
agreement conferring all rights and powers necessary for the Interim 
Trustee to satisfy his responsibilities under the Order to assure 
successful divestitures. The Commission has appointed Dr. Stephen J.D. 
Bell of Tunnell Consulting to be the Interim Monitor and it is 
anticipated that he will obtain support and assistance from his 
colleague, Mr. Arlo Millen. The monitors will ensure that the 
Commission remains informed about the status of the proposed 
divestitures and asset transfers.
    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.

Statement of the Federal Trade Commission

    The Federal Trade Commission has voted to accept a Consent Order in 
its investigation of Pfizer Inc.'s proposed acquisition of Wyeth. The 
Consent Order remedies the anticompetitive effects that the Commission 
believes are likely to result from the transaction in numerous markets 
for animal health products. After a thorough investigation, the 
Commission has concluded that the transaction does not raise 
anticompetitive concerns in any human health product markets. We write 
here to explain our decision, provide greater visibility into this 
important investigation, and, in the event that there are future such 
transactions, describe the framework that we used in our analysis.
    The Commission allocated extensive resources to the 
investigation.\2\ The price, quality, and availability of prescription 
pharmaceutical products has a tremendous impact on health care costs, 
and a significant part of the investigation focused on ascertaining 
whether the proposed transaction would adversely affect competition in 
human pharmaceutical markets. The Commission is dedicated to promoting 
competition in health care markets to ensure that costs are contained 
and to

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protect incentives for pharmaceutical companies to develop new 
medications.
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    \2\ During the course of its comprehensive investigation, Bureau 
of Competition staff conducted nearly 200 interviews, and reviewed 
hundreds of thousands of documents produced by the parties and third 
parties. The investigation also involved close cooperation with 
foreign competition authorities, including those from Australia, 
Canada, the European Union, Mexico, New Zealand, and South Africa.
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I. Background

    Pfizer is the largest prescription pharmaceutical company in both 
the United States and the world, with $48.4 billion in worldwide 
revenues for 2008. In addition to manufacturing and selling 
pharmaceutical products, Pfizer also researches and develops new 
pharmaceutical products. At the end of 2008, Pfizer had 114 products in 
various stages of clinical development. Based on the evidence gathered 
during the investigation, Pfizer's overall market share of 
pharmaceutical and biotech products totals about 9 percent in the 
United States.
    At the time of the acquisition, Wyeth was the twelfth-largest 
prescription pharmaceutical company in the United States. Wyeth's 
worldwide annual revenue totaled about $22.2 billion in 2008, $16.8 
billion of which was from pharmaceutical and biological sales. Like 
Pfizer, Wyeth also researches, develops, manufactures, and sells 
pharmaceutical products and is also a significant participant in the 
biologic and vaccine areas of human pharmaceuticals. Wyeth is the 
fourth largest biotechnology company by revenue in the world and has 18 
biologic products in clinical development.
    Although both Pfizer and Wyeth are substantial suppliers of human 
pharmaceutical products, their respective product portfolios are highly 
complementary. Staff's investigation evaluated numerous potential 
overlaps where the companies may compete against each other, either now 
or in the future. In particular, the investigation included significant 
analysis of four markets--treatments for renal cell carcinoma, 
Methicillin-resistant Staphylococcus aureus (or ``MRSA'' infections), 
osteoporosis, and Alzheimer's disease--to determine whether the 
transaction would undermine competition in those markets. Beyond these 
specific overlaps, the staff thoroughly investigated whether the 
transaction could have an impact on competition in human pharmaceutical 
markets more broadly, whether on innovation, the intellectual property 
landscape, clinical development, or marketing. The evidence 
demonstrates that it will not.

II. Competitive Effects Analysis

    Beyond the areas addressed by the Consent Order, the Commission 
analyzed three principal theories of potential competitive harm.
    First, we assessed whether the merger might substantially reduce 
competition in any relevant human health market in which Pfizer and 
Wyeth currently compete. We conclude that it does not.
    With respect to a small number of diseases or conditions, including 
renal cell carcinoma and MRSA infections, Pfizer and Wyeth both market 
treatments. Evidence gathered in the investigation showed that, 
although Pfizer and Wyeth produce drugs that target the same 
indications, their products are not close substitutes for--or indeed 
competitive with--each other. In addition, it appears that in these 
markets a sufficient number of other competitors will remain after 
consummation of the Pfizer/Wyeth transaction. Moreover, the products 
that these other companies offer are closer competitors to either the 
Pfizer or Wyeth products than the Pfizer and Wyeth products are to each 
other. Accordingly, Pfizer and Wyeth's consolidation is unlikely to 
facilitate the exercise of market power in any of these markets.
    Second, we assessed whether the evidence supported a challenge 
based upon a theory that the transaction threatened to eliminate 
potential future competition in any relevant market. We conclude that 
it does not.
    There are a small number of diseases or conditions for which Pfizer 
or Wyeth markets a product where the other company is developing a 
potentially competitive product, or both companies are developing 
products that could compete against each other in the future. Here, we 
considered not only the products that Pfizer and Wyeth are directly 
developing, but also products that other companies are developing in 
which Pfizer or Wyeth have a financial interest. For example, both 
Pfizer and Wyeth are developing products to treat osteoporosis. After 
careful investigation, though, we conclude that the transaction is not 
likely to affect competition in this market, based on non-public 
information that Pfizer's and Wyeth's products are unlikely to be close 
competitors.
    We also extensively investigated Alzheimer's disease treatments. 
Alzheimer's disease is a progressive and terminal neurodegenerative 
disorder of the brain that is the sixth-leading cause of death in the 
United States, affecting approximately five million people. The number 
of Americans suffering from Alzheimer's disease is expected to grow 
exponentially, and expenditures on drugs to treat Alzheimer's disease 
are expected to more than double in the next ten years. The future 
competitiveness of this market, for both economic and therapeutic 
reasons, is critical. Consequently, the Commission staff dedicated much 
of its time to investigating the competitive landscape in this market, 
and how the proposed transaction would affect it, if at all. Pfizer 
currently markets a product called Aricept, the leading drug on the 
market today to treat Alzheimer's disease, and has several other 
products to treat Alzheimer's disease in clinical development. Wyeth 
currently does not offer a product to treat Alzheimer's disease, but 
does have several products in development.
    The explosive growth of the Alzheimer's disease patient population 
has caused the market for treatments to attract considerable attention. 
Besides Pfizer and Wyeth, a significant number of other companies, 
including both large and small pharmaceutical companies and 
biotechnology companies, have products in development for the treatment 
of the disease. As of today, there are approximately 50 companies with 
at least 66 products in various phases of development. Among those 
companies are 14 of the largest pharmaceutical companies in the world, 
as well as numerous small- and medium-sized pharmaceutical and 
biotechnology firms. While there are several different therapeutic 
approaches being pursued for Alzheimer's disease, Pfizer and Wyeth 
overlap in only a small number of these areas. In those therapeutic 
areas where they do overlap, there are several other companies also 
developing products.
    Overall, the evidence demonstrates that Pfizer and Wyeth's products 
are unlikely to be sufficiently close competitors that the elimination 
of competition between them would affect the competitiveness of any 
relevant human health market. Rather, the most likely outcome is that 
they each will compete more closely with products from other companies.
    Third, we assessed whether a combined Pfizer/Wyeth would have a 
greater ability to engage in anticompetitive bundling, block new drug 
development with a merger-created patent thicket, or adversely impact 
the market for basic research and innovation in any human health 
markets, but with a particular focus on Alzheimer's disease, the area 
of most significant overlap. We conclude that the proposed transaction 
is unlikely to affect the market(s) in any of these ways.
    As part of its investigation, staff evaluated whether the 
acquisition would change the negotiating power between Pfizer and its 
customers such that consumers would be harmed because of unlawful 
tying, bundling, or

[[Page 62315]]

exclusive dealing by Pfizer. Prescription pharmaceutical customers 
(e.g., insurance companies) set up bid processes for purchasing 
pharmaceutical products on a product-by-product (or category-by-
category) basis and have generally resisted efforts by large 
pharmaceutical companies to bundle products across categories, unless 
the bundle is in the customer's best interest. We found no evidence 
that this acquisition would undermine customers' ability to prevent 
anticompetitive bundling. As a result, we conclude that the addition of 
the Wyeth portfolio of products to Pfizer's portfolio is not likely to 
enhance the merged entity's ability to engage in anticompetitive 
bundling, especially because the combined portfolio would contain few 
blockbuster drugs.
    Staff also investigated whether the acquisition would create a 
patent thicket by virtue of the breadth of the combined companies' 
patent portfolio. A merger-created patent thicket could reduce or 
eliminate competition in human pharmaceutical products by enabling the 
combined firm to prevent other pharmaceutical companies from developing 
products through the enforcement of intellectual property rights. After 
evaluating the parties' respective patent portfolios in a number of 
areas where both firms are active, including, most notably, Alzheimer's 
disease, the evidence showed that the combination of the intellectual 
property of Pfizer with that of Wyeth would not pose any greater 
barrier to entry to third-party companies than the intellectual 
property held by the companies individually.
    Finally, staff evaluated whether the transaction would decrease 
basic research or the pace of innovation in pharmaceutical markets by 
eliminating a leader in pharmaceutical research and development; 
changing the incentives of companies performing pharmaceutical research 
and development; or reducing the number of potential research, 
marketing, or funding partners. Pharmaceutical research and development 
is a dynamic field with multiple participants including both large and 
small traditional pharmaceutical companies, specialty pharmaceutical 
companies, biotechnology companies, and contract research 
organizations. The evidence does not indicate that the combination 
raises antitrust concerns in these respects.
    Even within the discrete product areas where both Pfizer and Wyeth 
are actively pursuing research and development, such as treatments for 
Alzheimer's disease, we conclude that the transaction is not likely to 
affect competition in basic research or innovation. Within Alzheimer's 
disease specifically, fundamental information about the disease, 
including its cause, how to diagnose it prior to the appearance of 
symptoms, and when intervention must occur to modify the disease, is 
still unknown. There is no scientific consensus about the most 
promising track for the treatment of Alzheimer's disease. As a result, 
it is a dynamic area of drug development, and the many companies 
working in this disease area are pursuing many different pathways with 
compounds that can have different effects and risk factors.
    Although Pfizer and Wyeth are two of the most active companies 
pursuing research and development activities in the Alzheimer's disease 
area, it is unlikely that the combination of the Pfizer and Wyeth's 
Alzheimer's disease pipelines will diminish the incentives of Pfizer or 
any other company to compete in the research and development of 
Alzheimer's disease treatments. Further, the combination of Pfizer and 
Wyeth is not likely to affect the ability of other companies to 
continue to develop and ultimately introduce new products to treat 
Alzheimer's disease.
    The Commission's extensive investigation and commitment of 
resources in this matter reflects its dedication to ensuring that 
pharmaceutical markets are competitive and that consumers have access 
to innovative and affordable medications. Although the Commission, 
based on the evidence gathered, determined that this transaction did 
not raise anticompetitive concerns in the markets for human 
pharmaceuticals, the Commission remains dedicated to ensuring that 
pharmaceutical markets are competitive. We will closely monitor these 
markets and continue to evaluate future transactions under the 
framework explained here to determine their effect on competition in 
the health care market, and, where appropriate, take action to ensure 
that any merger or acquisition does not undermine the pharmaceutical 
industry's competitiveness.

    By direction of the Commission, Commissioner Harbour and 
Commissioner Kovacic recused.
Donald S. Clark,
Secretary.
[FR Doc. E9-28336 Filed 11-25-09; 8:45 am]
BILLING CODE 6750-01-P