Watson Pharmaceuticals, Inc. and Andrx Corporation; Analysis of Agreement Containing Consent Orders to Aid Public Comment, 64694-64697 [E9-29251]
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Federal Register / Vol. 74, No. 234 / Tuesday, December 8, 2009 / Notices
held for extended periods of time could
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Please see the agency’s FR Y–12 OMB
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and draft reporting form and
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2009, the Federal Reserve published a
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48960) requesting public comment for
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of the FR Y–12. The comment period for
this notice expired on November 24,
2009. No comments were received.
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System, December 3, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9–29184 Filed 12–7–09; 8:45 am]
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[FR Doc. E9–29320 Filed 12–4–09; 4:15 pm]
BILLING CODE 6210–01–S
FEDERAL TRADE COMMISSION
[File No. 061 0139]
Watson Pharmaceuticals, Inc. and
Andrx Corporation; Analysis of
Agreement Containing Consent Orders
to Aid Public Comment
Federal Trade Commission.
Proposed Consent Agreement.
AGENCY:
ACTION:
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 January 4, 2010.
ADDRESSES: Interested parties are
invited to submit written comments
electronically or in paper form.
Comments should refer to ‘‘Watson
Arrow, File No. 061 0139’’ to facilitate
the organization of comments. Please
note that your comment — including
your name and your state — will be
placed on the public record of this
proceeding, including on the publicly
accessible FTC website, at (https://
www.ftc.gov/os/publiccomments.shtm).
Because comments will be made
public, they should not include any
sensitive personal information, such as
an individual’s Social Security Number;
date of birth; driver’s license number or
other state identification number, or
foreign country equivalent; passport
number; financial account number; or
credit or debit card number. Comments
also should not include any sensitive
health information, such as medical
records or other individually
identifiable health information. In
addition, comments should not include
any ‘‘[t]rade secret or any commercial or
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financial information which is obtained
from any person and which is privileged
or confidential. . . .,’’ as provided in
Section 6(f) of the FTC Act, 15 U.S.C.
46(f), and Commission Rule 4.10(a)(2),
16 CFR 4.10(a)(2). Comments containing
material for which confidential
treatment is requested must be filed in
paper form, must be clearly labeled
‘‘Confidential,’’ and must comply with
FTC Rule 4.9(c), 16 CFR 4.9(c).1
Because paper mail addressed to the
FTC is subject to delay due to
heightened security screening, please
consider submitting your comments in
electronic form. Comments filed in
electronic form should be submitted by
using the following weblink: (https://
public.commentworks.com/ftc/
watsonarrow) and following the
instructions on the web-based form. To
ensure that the Commission considers
an electronic comment, you must file it
on the web-based form at the weblink:
(https://public.commentworks.com/ftc/
watsonarrow). If this Notice appears at
(https://www.regulations.gov/search/
index.jsp), you may also file an
electronic comment through that
website. The Commission will consider
all comments that regulations.gov
forwards to it. You may also visit the
FTC website at (https://www.ftc.gov/) to
read the Notice and the news release
describing it.
A comment filed in paper form
should include the ‘‘Watson Arrow, File
No. 061 0139’’ 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 H-135
(Annex D), 600 Pennsylvania Avenue,
NW, Washington, DC 20580. 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.
The Federal Trade Commission Act
(‘‘FTC Act’’) and other laws the
Commission administers permit the
collection of public comments to
consider and use in this proceeding as
appropriate. The Commission will
consider all timely and responsive
public comments that it receives,
whether filed in paper or electronic
1The 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 FTC
Rule 4.9(c), 16 CFR 4.9(c).
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form. Comments received will be
available to the public on the FTC
website, to the extent practicable, at
(https://www.ftc.gov/os/
publiccomments.shtm). As a matter of
discretion, the Commission makes every
effort to remove home contact
information for individuals from the
public comments it receives before
placing those comments on the FTC
website. 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.shtm).
FOR FURTHER INFORMATION CONTACT:
Stephanie C. Bovee (202-326-2083),
Bureau of Competition, 600
Pennsylvania Avenue, NW, Washington,
D.C. 20580.
SUPPLEMENTARY INFORMATION: Pursuant
to section 6(f) of the Federal Trade
Commission Act, 38 Stat. 721, 15 U.S.C.
46(f), and § 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 6, 2009), on the
World Wide Web, at (https://
www.ftc.gov/os/actions.shtm). A paper
copy can be obtained from the FTC
Public Reference Room, Room 130-H,
600 Pennsylvania Avenue, NW,
Washington, D.C. 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
Containing Consent Orders (‘‘Consent
Agreement’’) from Watson
Pharmaceuticals, Inc. (‘‘Watson’’) and
Andrx Corporation (‘‘Andrx’’), which is
designed to remedy the anticompetitive
effects of the acquisition of Andrx by
Watson. Under the terms of the
proposed Consent Agreement, the
companies would be required to: (1)
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terminate Watson’s marketing
agreement with Interpharm Holdings,
Inc. (‘‘Interpharm’’) and return all of the
Watson rights and assets necessary to
market generic hydrocodone bitartrate/
ibuprofen tablets back to Interpharm; (2)
assign and divest the Andrx rights and
assets necessary to develop,
manufacture, and market generic
extended release glipizide (‘‘glipizide
ER’’) tablets to Actavis Elizabeth LLC, a
subsidiary of The Actavis Group hf.
(‘‘Actavis’’); and (3) divest the Andrx
rights and assets necessary to develop,
manufacture, and market the eleven
generic oral contraceptive products to
Teva Pharmaceutical Industries, Inc.
(‘‘Teva’’).
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 an Agreement and Plan of
Merger dated March 12, 2006, Watson
proposes to acquire all of the
outstanding shares of Andrx at a cost of
$25.00 per share. 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, by lessening
competition in the U.S. markets for the
manufacture and sale of the following
generic pharmaceutical products: (1)
hydrocodone bitartrate/ibuprofen
tablets; (2) glipizide ER tablets; and (3)
eleven oral contraceptive products (the
‘‘Products’’). The proposed Consent
Agreement will remedy the alleged
violations by replacing the lost
competition that would result from the
acquisition in each of these markets.
The Products and Structure of the
Markets
The proposed acquisition of Andrx by
Watson would strengthen Watson’s
position in generic pharmaceuticals and
provide Watson with a stronger pipeline
of generic products. The companies
overlap in a number of generic
pharmaceutical markets, and if
consummated, the transaction likely
would lead to anticompetitive effects in
thirteen of these markets, including
eleven oral contraceptive markets.
The transaction would reduce the
number of competing generic suppliers
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64695
in the overlap markets. The number of
generic suppliers has a direct and
substantial effect on generic pricing as
each additional generic supplier can
have a competitive impact on the
market. Because there are multiple
generic equivalents for each of the
products at issue here, the branded
versions no longer significantly
constrain the generics’ pricing.
For four generic products, Watson and
Andrx currently are two of a small
number of suppliers offering the
product. In each of these markets, there
are a limited number of competitors. In
nine additional oral contraceptive
product markets, both Watson and
Andrx have generic products either on
the market or in development.
Furthermore, there are few firms that are
capable of, and interested in, entering
these markets. As a result, the proposed
acquisition would eliminate important
future competition in these markets.
Hydrocodone bitartrate/ibuprofen is a
combination of an opioid analgesic
agent, hydrocodone bitartrate, and a
nonsteroidal anti-inflammatory drug
(‘‘NSAID’’), ibuprofen and is the generic
version of Abbott Laboratories Inc.’s
Vicoprofen. Generic hydrocodone
bitartrate/ibuprofen tablets are used for
the short-term management of acute
pain and have been available in the
United States since 2003. In 2005, sales
of generic hydrocodone bitartrate/
ibuprofen exceeded $62 million. Only
three companies compete in the generic
hydrocodone bitartrate/ibuprofen
market: Watson, Andrx, and Teva. An
additional company is in the process of
obtaining FDA approval and expects to
enter the market once the approval is
granted, which is likely to occur in the
next two years. Teva is the market
leader with approximately 62 percent of
the market. Andrx and Watson account
for the rest of the market with about 27
percent and 12 percent market share,
respectively. After Watson’s acquisition
of Andrx, Watson’s market share would
increase from 12 percent to
approximately 39 percent, and Teva
would be the only remaining competitor
to Watson.
Glipizide ER is the generic version of
Pfizer’s Glucotrol XL. Glipizide ER
corrects the effects of type 2 diabetes by
stimulating the release of insulin in the
pancreas, thereby reducing blood sugar
levels in the body. Generic glipizide ER
was first introduced in the United States
in November 2003. In 2005, sales of
generic glipizide ER totaled
approximately $174 million. Watson is
the leading supplier in the U.S. market
for generic glipizide ER tablets with
over 45 percent of the market. Only two
other firms, Andrx and Greenstone Ltd.
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(‘‘Greenstone’’), compete with Watson
in this market. Andrx and Greenstone
have market shares of about 35 percent
and 20 percent, respectively. Postacquisition, Watson’s market share
would increase to over 80 percent, and
Greenstone would be the only other
remaining U.S. supplier of generic
glipizide ER.
Oral contraceptives are pills taken by
mouth to prevent ovulation and
pregnancy. They are the most common
method of reversible birth control, used
by up to 82 percent of women in the
United States at some time during their
reproductive years. Oral contraceptives
contain various formulations of
synthetic estrogen and progestin, which
are chemical analogues of natural
female hormones. Andrx and Teva have
an agreement whereby Andrx develops
and manufactures these oral
contraceptives and Teva markets the
products. Andrx also receives a royalty
payment on Teva’s sales of the products.
In each of the eleven relevant oral
contraceptive markets, Watson and
Andrx/Teva are two of a limited number
of suppliers or potential entrants.
Two of the oral contraceptive
products at issue are currently marketed
formulations of generic norgestimate/
ethinyl estradiol bioequivalent to the
branded products, Ortho-Cyclen and
Ortho Tri-Cyclen, from Johnson &
Johnson. Both products have varying
ratios of norgestimate (a progestin) and
ethinyl estradiol (an estrogen) that
prevent ovulation and pregnancy.
Generic formulations of Ortho-Cyclen
and Ortho Tri-Cyclen are among the best
selling generic oral contraceptives,
representing sales of over $58 million
and $261 million, respectively, in 2005.
Watson, Andrx/Teva, and Barr
Pharmaceuticals, Inc. (‘‘Barr’’) are the
only suppliers of generic Ortho-Cyclen
and generic Ortho Tri-Cyclen in the
United States. After the acquisition, the
combined Watson/Andrx would
account for 28 percent of the generic
Ortho-Cyclen market. Watson is the
leading supplier in the U.S. market for
the manufacture and sale of generic
Ortho Tri-Cyclen tablets. After the
acquisition, Watson would account for
56 percent of the market.
Watson currently competes in seven
additional oral contraceptive markets
where Andrx/Teva is developing
competitive products. These seven
markets represent generic products that
are equivalent to Ortho-cept, Triphasil
28, Alesse, Ortho-Novum 1/35, OrthoNovum 7/7/7, Loestrin FE (1 mg/0.020
mg), and Loestrin FE (1.5 mg/0.030 mg).
In each of these highly concentrated
markets, Watson is one of only two or
three suppliers. Andrx/Teva is one of a
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limited number of firms developing
generic oral contraceptives that would
compete in each of these markets, and
is well-positioned to enter the markets
in a timely manner.
Both Watson and Andrx/Teva are
developing generic Mircette tablets and
generic Ovcon-35 tablets. They are two
of a limited number of suppliers capable
of entering these future generic markets
in a timely manner.
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 Food and Drug
Administration (‘‘FDA’’) approval for
the manufacture and sale of the
Products takes at least two (2) years due
to substantial regulatory, technological,
and intellectual property barriers.
Effects
The proposed acquisition would
cause significant anticompetitive harm
to consumers in the U.S. markets for the
manufacture and sale of generic
hydrocodone bitartrate/ibuprofen
tablets, generic glipizide ER tablets,
generic Ortho-Cyclen tablets, and
generic Ortho Tri-Cyclen tablets. In
generic pharmaceutical markets, pricing
is heavily influenced by the number of
competitors that participate in a given
market. Here, the evidence shows that
the price of the generic pharmaceutical
product at issue decreases with the
entry of each additional competitor. The
proposed transaction would eliminate
one of at most four competitors in these
markets. Evidence gathered during our
investigation indicates that
anticompetitive effects – whether
unilateral or coordinated – are likely to
result from a decrease in the number of
independent competitors in the markets
at issue.
In the markets for generic
hydrocodone bitartrate/ibuprofen and
generic glipizide ER, the acquisition of
Andrx by Watson 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 other market
participants to raise prices. Likewise, in
the generic oral contraceptive markets,
the reduction in the number of
competitors from three to two would
likely lead to higher prices.
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The competitive concerns can be
characterized as both unilateral and
coordinated in nature. The homogenous
nature of the products involved, the
minimal incentives to deviate, and the
relatively predictable prospects of
gaining new business all indicate that
the firms in the market will find it
profitable to coordinate their pricing.
The impact that a reduction in the
number of firms would have on pricing
can also be explained in terms of
unilateral effects, as the likelihood that
the merging parties would be the first
and second choices in a significant
number of bidding situations is
enhanced where the number of firms
participating in the market decreases
substantially.
The acquisition also would cause
significant anticompetitive harm to
consumers in the U.S. markets for the
manufacture and sale of generic OrthoCept tablets, generic Triphasil 28
tablets, generic Alesse tablets, generic
OrthoNovum 1/35 tablets, generic
OrthoNovum 7/7/7 tablets, generic
Loestrin FE (1 mg/0.020 mg) tablets, and
generic Loestrin FE (1.5 mg/0.030 mg)
tablets, generic Mircette tablets and
generic Ovcon-35 tablets by eliminating
future competition between Watson and
Andrx. In each of these markets, there
are no more than three current
suppliers, and Andrx is poised to enter
in the near future. Andrx’s independent
entry into these markets likely would
result in lower prices. The proposed
transaction would eliminate that
independent entry and, hence, would
leave prices at their current, higher
levels.
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, Watson and
Andrx 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: (1) Watson terminate its marketing
agreement with Interpharm, thereby
returning all of its rights to generic
hydrocodone bitartrate/ibuprofen back
to Interpharm; (2) Andrx divest its rights
and assets to generic glipizide ER to
Actavis, including assigning its supply
agreement with Pfizer, Inc.; and (3)
Andrx divest its rights and assets related
to the eleven generic oral contraceptives
to Teva, and supply Teva with the
products for five years in order for Teva
(or its designated contract manufacturer)
to obtain all necessary FDA approvals to
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manufacture and sell the products
independently.
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.
Interpharm specializes in the
development, manufacture, and
marketing of generic pharmaceutical
and over-the-counter products.
Interpharm currently manufactures and
markets 23 generic pharmaceutical
products, and has ten ANDAs under
review by the FDA. As a contract
manufacturer for Watson’s product,
Interpharm is an acceptable acquirer of
generic hydrocodone bitartrate/
ibuprofen because it already has the
experience, know-how, and
manufacturing infrastructure to produce
and sell generic hydrocodone bitartrate/
ibuprofen in the United States.
Interpharm understands the scientific
and technical details of generic
hydrocodone bitartrate/ibuprofen
because it formulated, developed, and
tested the product, and registered the
product with the FDA. Moreover,
Interpharm 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,
good reputation, and experience
marketing generic products, Interpharm
is well-positioned to replicate the
competition that would be lost with the
proposed acquisition.
Actavis is a leading developer,
manufacturer, marketer, and distributer
of generic pharmaceutical products, and
is an acceptable acquirer of generic
glipizide ER. Actavis has an extensive
distribution network in the United
States, with three major manufacturing
facilities and approximately 162
pharmaceutical products in the U.S.
market. Actavis also has experience
obtaining FDA approvals for generic
pharmaceutical products. While Actavis
currently does not compete in the
market for the divested assets, it has the
resources, capabilities, good reputation,
and experience necessary to restore
fully the competition that would be lost
if the proposed Watson/Andrx
transaction were to proceed
unremedied.
Teva is a global pharmaceutical
company specializing in the
development, production, and
marketing of generic and branded
pharmaceuticals. Founded in 1901 and
headquartered in Petach Tikva, Israel,
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Teva employs approximately 25,000
people worldwide and has production
facilities in Israel, North America,
Europe, and Mexico. Teva and its
affiliates are the world’s largest generic
pharmaceutical company with over 300
generic products, representing $6.6
billion in estimated 2006 revenue.
Because of its current agreement with
Andrx, and its well-known reputation
and experience in the pharmaceutical
industry, Teva is ideally positioned to
be a viable, independent competitor in
the eleven generic oral contraceptive
markets. The acquisition of the eleven
generic oral contraceptive products by
Teva would effectively restore the
competition that would be lost with the
proposed merger.
If the Commission determines that
either Interpharm or Actavis is not an
acceptable acquirer of the assets to be
divested, or that the manner of the
divestitures to Interpharm, Actavis, or
Teva 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 Watson and Andrx 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
Watson and Andrx.
The Commission has appointed
Francis J. Civille as the Interim Monitor
to oversee the asset transfer and to
ensure Watson and Andrx’s compliance
with all of the provisions of the
proposed Consent Agreement. Mr.
Civille has over 27 years of experience
in the pharmaceutical industry. He is a
highly-qualified expert in areas such as
pharmaceutical research and
development, regulatory approval,
manufacturing and supply, and
marketing. He has provided consulting
services in healthcare business
development to major pharmaceutical
companies, biotechnology companies,
universities, and government agencies.
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 Watson and Andrx
to file reports with the Commission
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64697
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 Order or
to modify its terms in any way.
By direction of the Commission, with
Commissioner Harbour recused.
Donald S. Clark
Secretary.
[FR Doc. E9–29251 Filed 12–7–09: 7:54 am]
BILLING CODE 6750–01–S
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Implementation of Section 5001 of the
American Recovery and Reinvestment
Act of 2009 for Adjustments to the
Third and Fourth Quarters of Fiscal
Year 2009 Federal Medical Assistance
Percentage Rates for Federal Matching
Shares for Medicaid and Title IV–E
Foster Care, Adoption Assistance and
Guardianship Assistance Programs
Office of the Secretary, DHHS.
Notice
AGENCY:
ACTION:
SUMMARY: This notice finalizes the
methodology for calculating the higher
Federal matching funding that is made
available under Section 5001 of the
American Recovery and Reinvestment
Act of 2009 (ARRA), and provides the
final calculation of the adjusted Federal
Medical Assistance Percentage (FMAP)
rates for the third and fourth quarters of
Fiscal Year 2009 (FY09). Section 5001 of
the ARRA provides for temporary
increases in the FMAP rates to provide
fiscal relief to States and to protect and
maintain State Medicaid and certain
other assistance programs in a period of
economic downturn. The increased
FMAP rates apply during a recession
adjustment period that is defined as the
period beginning October 1, 2008 and
ending December 31, 2010.
DATES: Effective Date: The percentages
listed are for the third quarter of FY09
beginning April 1, 2009 and ending June
30, 2009 and for the fourth quarter of
FY09 beginning July 1, 2009 and ending
September 30, 2009.
A. Background
The FMAP is used to determine the
amount of Federal matching for
specified State expenditures for
assistance payments under programs
under the Social Security Act. Sections
1905(b) and 1101(a)(8)(B) of the Social
Security Act (‘‘the Act’’) require the
Secretary of Health and Human Services
E:\FR\FM\08DEN1.SGM
08DEN1
]]>Agencies
[Federal Register Volume 74, Number 234 (Tuesday, December 8, 2009)]
[Notices]
[Pages 64694-64697]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-29251]
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FEDERAL TRADE COMMISSION
[File No. 061 0139]
Watson Pharmaceuticals, Inc. and Andrx Corporation; Analysis of
Agreement Containing Consent Orders 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 January 4, 2010.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to ``Watson
Arrow, File No. 061 0139'' to facilitate the organization of comments.
Please note that your comment -- including your name and your state --
will be placed on the public record of this proceeding, including on
the publicly accessible FTC website, at (https://www.ftc.gov/os/publiccomments.shtm).
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. . . .,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with FTC Rule
4.9(c), 16 CFR 4.9(c).\1\
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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 FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: (https://public.commentworks.com/ftc/watsonarrow) and following the instructions
on the web-based form. To ensure that the Commission considers an
electronic comment, you must file it on the web-based form at the
weblink: (https://public.commentworks.com/ftc/watsonarrow). If this
Notice appears at (https://www.regulations.gov/search/index.jsp), you
may also file an electronic comment through that website. The
Commission will consider all comments that regulations.gov forwards to
it. You may also visit the FTC website at (https://www.ftc.gov/) to read
the Notice and the news release describing it.
A comment filed in paper form should include the ``Watson Arrow,
File No. 061 0139'' 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 H-135 (Annex D), 600
Pennsylvania Avenue, NW, Washington, DC 20580. 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.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic
[[Page 64695]]
form. Comments received will be available to the public on the FTC
website, to the extent practicable, at (https://www.ftc.gov/os/publiccomments.shtm). As a matter of discretion, the Commission makes
every effort to remove home contact information for individuals from
the public comments it receives before placing those comments on the
FTC website. 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.shtm).
FOR FURTHER INFORMATION CONTACT: Stephanie C. Bovee (202-326-2083),
Bureau of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C.
20580.
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 6, 2009), on the World Wide Web, at (https://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington,
D.C. 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 Containing Consent Orders (``Consent
Agreement'') from Watson Pharmaceuticals, Inc. (``Watson'') and Andrx
Corporation (``Andrx''), which is designed to remedy the
anticompetitive effects of the acquisition of Andrx by Watson. Under
the terms of the proposed Consent Agreement, the companies would be
required to: (1) terminate Watson's marketing agreement with Interpharm
Holdings, Inc. (``Interpharm'') and return all of the Watson rights and
assets necessary to market generic hydrocodone bitartrate/ibuprofen
tablets back to Interpharm; (2) assign and divest the Andrx rights and
assets necessary to develop, manufacture, and market generic extended
release glipizide (``glipizide ER'') tablets to Actavis Elizabeth LLC,
a subsidiary of The Actavis Group hf. (``Actavis''); and (3) divest the
Andrx rights and assets necessary to develop, manufacture, and market
the eleven generic oral contraceptive products to Teva Pharmaceutical
Industries, Inc. (``Teva'').
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 an Agreement and Plan of Merger dated March 12, 2006,
Watson proposes to acquire all of the outstanding shares of Andrx at a
cost of $25.00 per share. 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. Sec. 18, and Section 5 of the
Federal Trade Commission Act, as amended, 15 U.S.C. Sec. 45, by
lessening competition in the U.S. markets for the manufacture and sale
of the following generic pharmaceutical products: (1) hydrocodone
bitartrate/ibuprofen tablets; (2) glipizide ER tablets; and (3) eleven
oral contraceptive products (the ``Products''). The proposed Consent
Agreement will remedy the alleged violations by replacing the lost
competition that would result from the acquisition in each of these
markets.
The Products and Structure of the Markets
The proposed acquisition of Andrx by Watson would strengthen
Watson's position in generic pharmaceuticals and provide Watson with a
stronger pipeline of generic products. The companies overlap in a
number of generic pharmaceutical markets, and if consummated, the
transaction likely would lead to anticompetitive effects in thirteen of
these markets, including eleven oral contraceptive markets.
The transaction would reduce the number of competing generic
suppliers in the overlap markets. The number of generic suppliers has a
direct and substantial effect on generic pricing as each additional
generic supplier can have a competitive impact on the market. Because
there are multiple generic equivalents for each of the products at
issue here, the branded versions no longer significantly constrain the
generics' pricing.
For four generic products, Watson and Andrx currently are two of a
small number of suppliers offering the product. In each of these
markets, there are a limited number of competitors. In nine additional
oral contraceptive product markets, both Watson and Andrx have generic
products either on the market or in development. Furthermore, there are
few firms that are capable of, and interested in, entering these
markets. As a result, the proposed acquisition would eliminate
important future competition in these markets.
Hydrocodone bitartrate/ibuprofen is a combination of an opioid
analgesic agent, hydrocodone bitartrate, and a nonsteroidal anti-
inflammatory drug (``NSAID''), ibuprofen and is the generic version of
Abbott Laboratories Inc.'s Vicoprofen. Generic hydrocodone bitartrate/
ibuprofen tablets are used for the short-term management of acute pain
and have been available in the United States since 2003. In 2005, sales
of generic hydrocodone bitartrate/ibuprofen exceeded $62 million. Only
three companies compete in the generic hydrocodone bitartrate/ibuprofen
market: Watson, Andrx, and Teva. An additional company is in the
process of obtaining FDA approval and expects to enter the market once
the approval is granted, which is likely to occur in the next two
years. Teva is the market leader with approximately 62 percent of the
market. Andrx and Watson account for the rest of the market with about
27 percent and 12 percent market share, respectively. After Watson's
acquisition of Andrx, Watson's market share would increase from 12
percent to approximately 39 percent, and Teva would be the only
remaining competitor to Watson.
Glipizide ER is the generic version of Pfizer's Glucotrol XL.
Glipizide ER corrects the effects of type 2 diabetes by stimulating the
release of insulin in the pancreas, thereby reducing blood sugar levels
in the body. Generic glipizide ER was first introduced in the United
States in November 2003. In 2005, sales of generic glipizide ER totaled
approximately $174 million. Watson is the leading supplier in the U.S.
market for generic glipizide ER tablets with over 45 percent of the
market. Only two other firms, Andrx and Greenstone Ltd.
[[Page 64696]]
(``Greenstone''), compete with Watson in this market. Andrx and
Greenstone have market shares of about 35 percent and 20 percent,
respectively. Post-acquisition, Watson's market share would increase to
over 80 percent, and Greenstone would be the only other remaining U.S.
supplier of generic glipizide ER.
Oral contraceptives are pills taken by mouth to prevent ovulation
and pregnancy. They are the most common method of reversible birth
control, used by up to 82 percent of women in the United States at some
time during their reproductive years. Oral contraceptives contain
various formulations of synthetic estrogen and progestin, which are
chemical analogues of natural female hormones. Andrx and Teva have an
agreement whereby Andrx develops and manufactures these oral
contraceptives and Teva markets the products. Andrx also receives a
royalty payment on Teva's sales of the products. In each of the eleven
relevant oral contraceptive markets, Watson and Andrx/Teva are two of a
limited number of suppliers or potential entrants.
Two of the oral contraceptive products at issue are currently
marketed formulations of generic norgestimate/ethinyl estradiol
bioequivalent to the branded products, Ortho-Cyclen and Ortho Tri-
Cyclen, from Johnson & Johnson. Both products have varying ratios of
norgestimate (a progestin) and ethinyl estradiol (an estrogen) that
prevent ovulation and pregnancy. Generic formulations of Ortho-Cyclen
and Ortho Tri-Cyclen are among the best selling generic oral
contraceptives, representing sales of over $58 million and $261
million, respectively, in 2005.
Watson, Andrx/Teva, and Barr Pharmaceuticals, Inc. (``Barr'') are
the only suppliers of generic Ortho-Cyclen and generic Ortho Tri-Cyclen
in the United States. After the acquisition, the combined Watson/Andrx
would account for 28 percent of the generic Ortho-Cyclen market. Watson
is the leading supplier in the U.S. market for the manufacture and sale
of generic Ortho Tri-Cyclen tablets. After the acquisition, Watson
would account for 56 percent of the market.
Watson currently competes in seven additional oral contraceptive
markets where Andrx/Teva is developing competitive products. These
seven markets represent generic products that are equivalent to Ortho-
cept, Triphasil 28, Alesse, Ortho-Novum 1/35, Ortho-Novum 7/7/7,
Loestrin FE (1 mg/0.020 mg), and Loestrin FE (1.5 mg/0.030 mg). In each
of these highly concentrated markets, Watson is one of only two or
three suppliers. Andrx/Teva is one of a limited number of firms
developing generic oral contraceptives that would compete in each of
these markets, and is well-positioned to enter the markets in a timely
manner.
Both Watson and Andrx/Teva are developing generic Mircette tablets
and generic Ovcon-35 tablets. They are two of a limited number of
suppliers capable of entering these future generic markets in a timely
manner.
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 Food and Drug Administration
(``FDA'') approval for the manufacture and sale of the Products takes
at least two (2) years due to substantial regulatory, technological,
and intellectual property barriers.
Effects
The proposed acquisition would cause significant anticompetitive
harm to consumers in the U.S. markets for the manufacture and sale of
generic hydrocodone bitartrate/ibuprofen tablets, generic glipizide ER
tablets, generic Ortho-Cyclen tablets, and generic Ortho Tri-Cyclen
tablets. In generic pharmaceutical markets, pricing is heavily
influenced by the number of competitors that participate in a given
market. Here, the evidence shows that the price of the generic
pharmaceutical product at issue decreases with the entry of each
additional competitor. The proposed transaction would eliminate one of
at most four competitors in these markets. Evidence gathered during our
investigation indicates that anticompetitive effects - whether
unilateral or coordinated - are likely to result from a decrease in the
number of independent competitors in the markets at issue.
In the markets for generic hydrocodone bitartrate/ibuprofen and
generic glipizide ER, the acquisition of Andrx by Watson 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 other market participants to raise prices.
Likewise, in the generic oral contraceptive markets, the reduction in
the number of competitors from three to two would likely lead to higher
prices.
The competitive concerns can be characterized as both unilateral
and coordinated in nature. The homogenous nature of the products
involved, the minimal incentives to deviate, and the relatively
predictable prospects of gaining new business all indicate that the
firms in the market will find it profitable to coordinate their
pricing. The impact that a reduction in the number of firms would have
on pricing can also be explained in terms of unilateral effects, as the
likelihood that the merging parties would be the first and second
choices in a significant number of bidding situations is enhanced where
the number of firms participating in the market decreases
substantially.
The acquisition also would cause significant anticompetitive harm
to consumers in the U.S. markets for the manufacture and sale of
generic Ortho-Cept tablets, generic Triphasil 28 tablets, generic
Alesse tablets, generic OrthoNovum 1/35 tablets, generic OrthoNovum 7/
7/7 tablets, generic Loestrin FE (1 mg/0.020 mg) tablets, and generic
Loestrin FE (1.5 mg/0.030 mg) tablets, generic Mircette tablets and
generic Ovcon-35 tablets by eliminating future competition between
Watson and Andrx. In each of these markets, there are no more than
three current suppliers, and Andrx is poised to enter in the near
future. Andrx's independent entry into these markets likely would
result in lower prices. The proposed transaction would eliminate that
independent entry and, hence, would leave prices at their current,
higher levels.
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, Watson and Andrx 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: (1) Watson terminate its marketing agreement with Interpharm,
thereby returning all of its rights to generic hydrocodone bitartrate/
ibuprofen back to Interpharm; (2) Andrx divest its rights and assets to
generic glipizide ER to Actavis, including assigning its supply
agreement with Pfizer, Inc.; and (3) Andrx divest its rights and assets
related to the eleven generic oral contraceptives to Teva, and supply
Teva with the products for five years in order for Teva (or its
designated contract manufacturer) to obtain all necessary FDA approvals
to
[[Page 64697]]
manufacture and sell the products independently.
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.
Interpharm specializes in the development, manufacture, and
marketing of generic pharmaceutical and over-the-counter products.
Interpharm currently manufactures and markets 23 generic pharmaceutical
products, and has ten ANDAs under review by the FDA. As a contract
manufacturer for Watson's product, Interpharm is an acceptable acquirer
of generic hydrocodone bitartrate/ibuprofen because it already has the
experience, know-how, and manufacturing infrastructure to produce and
sell generic hydrocodone bitartrate/ibuprofen in the United States.
Interpharm understands the scientific and technical details of generic
hydrocodone bitartrate/ibuprofen because it formulated, developed, and
tested the product, and registered the product with the FDA. Moreover,
Interpharm 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, good
reputation, and experience marketing generic products, Interpharm is
well-positioned to replicate the competition that would be lost with
the proposed acquisition.
Actavis is a leading developer, manufacturer, marketer, and
distributer of generic pharmaceutical products, and is an acceptable
acquirer of generic glipizide ER. Actavis has an extensive distribution
network in the United States, with three major manufacturing facilities
and approximately 162 pharmaceutical products in the U.S. market.
Actavis also has experience obtaining FDA approvals for generic
pharmaceutical products. While Actavis currently does not compete in
the market for the divested assets, it has the resources, capabilities,
good reputation, and experience necessary to restore fully the
competition that would be lost if the proposed Watson/Andrx transaction
were to proceed unremedied.
Teva is a global pharmaceutical company specializing in the
development, production, and marketing of generic and branded
pharmaceuticals. Founded in 1901 and headquartered in Petach Tikva,
Israel, Teva employs approximately 25,000 people worldwide and has
production facilities in Israel, North America, Europe, and Mexico.
Teva and its affiliates are the world's largest generic pharmaceutical
company with over 300 generic products, representing $6.6 billion in
estimated 2006 revenue. Because of its current agreement with Andrx,
and its well-known reputation and experience in the pharmaceutical
industry, Teva is ideally positioned to be a viable, independent
competitor in the eleven generic oral contraceptive markets. The
acquisition of the eleven generic oral contraceptive products by Teva
would effectively restore the competition that would be lost with the
proposed merger.
If the Commission determines that either Interpharm or Actavis is
not an acceptable acquirer of the assets to be divested, or that the
manner of the divestitures to Interpharm, Actavis, or Teva 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 Watson and Andrx 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 Watson and Andrx.
The Commission has appointed Francis J. Civille as the Interim
Monitor to oversee the asset transfer and to ensure Watson and Andrx's
compliance with all of the provisions of the proposed Consent
Agreement. Mr. Civille has over 27 years of experience in the
pharmaceutical industry. He is a highly-qualified expert in areas such
as pharmaceutical research and development, regulatory approval,
manufacturing and supply, and marketing. He has provided consulting
services in healthcare business development to major pharmaceutical
companies, biotechnology companies, universities, and government
agencies. 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 Watson and Andrx 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 Order or to modify its terms in
any way.
By direction of the Commission, with Commissioner Harbour recused.
Donald S. Clark
Secretary.
[FR Doc. E9-29251 Filed 12-7-09: 7:54 am]
BILLING CODE 6750-01-S
