[Federal Register Volume 63, Number 42 (Wednesday, March 4, 1998)]
[Notices]
[Pages 10626-10628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5534]


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FEDERAL TRADE COMMISSION

[File No. 971-0103]


Roche Holding Ltd.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.


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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 that accompanies the consent agreement 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 May 4, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: William Baer or Christina Perez, FTC/
H-374, Washington, DC 20580. (202) 326-2932 or 326-2048.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's 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 sixty (60) 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 February 25, 1998), on the World Wide Web, at ``http://
www.ftc.gov/os/actions/htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room H-130, Sixth Street and Pennsylvania 
Avenue, NW., Washington, D.C. 20580, either in person or by calling 
(202) 326-3627. Public comment is invited. Such comments or views will 
be considered by the Commission and will be available for inspection 
and copying at its principal office in accordance with 
Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing a Proposed Consent Order 
(``Order'') from Roche Holding Ltd (``Roche''), which remedies the 
anticompetitive effects of Roche's acquisition of Corange Limited. 
Corange is the parent company of Boehringer Mannheim (``BM''). Both 
Roche and BM manufacture a wide array of pharmaceutical and diagnostic 
instruments and reagents. The proposed Order remedies the acquisition's 
anticompetitive effects by requiring Roche to divest BM's cardiac 
thrombolytic agent and drugs of abuse testing (``DAT'') reagent assets 
as viable, on-going product lines. Roche has entered into an agreement 
to divest to Centocor, Inc. (``Centocor'') BM's cardiac thrombolytic 
agent assets.
    The proposed Order has been placed on the public record for sixty 
(60) days for reception of comments by interested persons. Public 
comments regarding the proposed divestiture of the United States and 
Canadian Retavase businesses to Centocor, Inc. will be considered with 
other comments on the proposed Order. Comments received during this 
period will become part of the public record. After sixty (60) days, 
the Commission will review the agreement and the comments received and 
will decide whether it should withdraw from the agreement or make final 
the agreement's proposed Order.
    Pursuant to a Stock Purchase Agreement signed May 24, 1997, Roche 
agreed to purchase 100% of the outstanding voting stock of Corange for 
approximately $11 billion. The proposed Complaint alleges that the 
acquisition violates Section 7 of the Clayton Act, as amended, 15 
U.S.C. 18, and section 5 of the FTC Act, as amended, 15 U.S.C. 45, in 
the markets for the research, development, manufacture and sale of 
cardiac thrombolytic agents and workplace DAT reagents.
    Cardiac thrombolytic agents are pharmaceuticals used to treat heart 
attacks by dissolving blood clots in the blood vessels of the heart. 
Angioplasty, the only other method of treating heart attacks, is a very 
expensive surgical procedure that is not available at many hospitals in 
the United States. As a result, there are no competitive substitutes 
for cardiac thrombolytic agents.
    The U.S. cardiac thrombolytic agents market is highly concentrated. 
According to studies published in the New England Journal of Medicine, 
the safest and most effective cardiac thrombolytic agents are BM's 
Retavase and Genetech's Activase. Roche owns 68% of Genetech's stock. 
As a result of these studies, it appears that the only other cardiac 
thrombolytic agent approved for use in the United States, 
Streptokinase, is not an acceptable substitute for most U.S. 
physicians. Also, because of the lengthy development time involved in 
entering the cardiac thrombolytic agent market, no other company is 
expected to enter the United States market for at least two years. For 
these reasons, the acquisition, if consummated, would lead to the 
elimination of the only head-to-head competition of safe and effective 
cardiac thrombolytic agents, and therefore, is likely to lead to higher 
prices.
    DAT reagents are chemical antibodies that are combined with a urine 
specimen to detect the presence of an illegal drug. Workplace DAT is 
pre-employment, random, post-accident and reasonable cause testing of 
employees in law enforcement, federal government and private industry 
for safety and security reasons. It is conducted at commercial 
laboratories with high-volume dedicated instruments that can only use 
workplace DAT reagents. DAT conducted in hospitals is very different 
from workplace DAT. Hospitals use medium- to low-volume instruments 
that can conduct a wide-variety of tests and use a wide variety of 
reagents that cannot be used economically for workplace DAT.
    The workplace market of DAT reagents is highly concentrated and new 
entry would be neither timely nor sufficient. A new producer of 
workplace DAT reagents would find it very difficult to develop a full 
line of workplace DAT reagents, as well as gain customer acceptance 
within two years. Roche and BM are two of only four suppliers of 
workplace DAT reagents in the United States. By eliminating the 
competition between two of the top three competitors in this highly 
concentrated market, the proposed acquisition would enhance the 
likelihood of coordinated interaction between or among the remaining 
firms in the market, increasing the likelihood that consumers in the 
United States would be forced to pay higher prices for workplace DAT 
reagents.
    The proposed Order remedies the anticompetitive effects in the 
cardiac thrombolytic agent market by requiring Roche to divest all of 
the assets relating to BM's United States and Canadian Retavase 
businesses to Centocor, Inc. or another Commission-approved buyer. 
Centocor is an established biotechnology company that currently sells 
ReoPro. ReoPro is a drug that is given to a patient after a heart 
attack to prevent new blood clots from forming. Because this is a 
complementary product to Retavase, it is anticipated that Centocor will 
achieve significant marketing synergies if it is allowed to purchase 
the Retavase businesses. Although Centocor is not one of the large, 
well-known pharmaceutical

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companies, it is well-respected by the medical community and has a 
significant capital base to support its proposed acquisition of the 
Retavase assets. In the event that Roche does not sell these assets to 
Centocor or another Commission-approved purchaser within ninety days of 
the Order's becoming final, a ``crown jewel'' provision in the Order 
permits a Commission-appointed trustee to divest the world-wide rights 
to Retavase.
    The proposed Order also effectively remedies the proposed 
transaction's anticompetitive effects in the workplace DAT reagent 
market by requiring Roche to divest BM's DAT reagents and grant a non-
exclusive license to all other Cloned Enzyme Donor Immuno-Assay 
(``CEDIA'') reagents in the United States, including, but not limited 
to, reagents used for therapeutic drug monitoring, thyroid analysis, 
testing for anemia, and hormone testing. In the event Roche fails to 
divest and license these assets within two months of the Order's 
becoming final, the proposed Order contains a ``crown jewel'' provision 
that allows a Commission-appointed trustee to divest all of BM's CEDIA 
reagents.
    The proposed Order also requires Roche to provide substantial 
assistance to each of the acquirers so that they can each compete 
effectively in the relevant markets. First, Roche must contract 
manufacture a supply of the divested products for the time period it 
takes for each acquirer to establish its own manufacturing processes 
and obtain its own FDA approvals to manufacture and sell Retavase and 
DAT reagents in the United States. Second, Roche must provide technical 
assistance and advice to assist both acquirers in their efforts to 
begin manufacturing the divested products. Finally, the Order provides 
the Retavase acquirer and the reagent acquirer the ability to hire 
former BM employees associated with the marketing or sales of Retavase 
or CEDIA reagents, respectively.
    In order to facilitate the smooth transfer of assets and ensure 
that the acquirers will get the assistance necessary to independently 
manufacture the products, the proposed Order also provides for the 
appointment of an interim trustee. The interm trustee will serve until 
the acquirers have received all necessary FDA approvals to manufacture 
and sell the divested products.
    Because it is becoming essential for a DAT reagents supplier to 
also provide its customers with DAT analyzers, the proposed Order 
requires Roche to terminate BM's exclusive distribution arrangement 
with Hitachi Ltd., and to inform Hitachi, within ten days of divesting 
the DAT reagents, that, as to the reagent acquirer, it waives all 
exclusivity provisions of BM's agreement with Hitachi.
    In addition, because of pending litigation between Genentech and 
BM, the proposed Order requires Roche to provide: (1) Full access to, 
and cooperation from, former BM employees and agents who have knowledge 
about the disputed patents; (2) access to any documents that may be 
relevant to the dispute; and (3) reimbursement for half of all the 
legal expenses relating to the dispute. In addition, Roche is 
prohibited from disclosing or otherwise making available to Genentech 
any information relating to the patent dispute without the prior 
written consent of the Retavase acquirer.
    The Order also requires Roche to provide to the Commission a report 
of compliance with the divestiture and licensing provisions of the 
Order within sixty (60) days following the date the Order becomes 
final, and every ninety (90) days thereafter until Roche has completed 
the divestitures and licensing. The Order also requires Roche to notify 
the Commission at least thirty (30) days prior to any change in the 
structure of Roche that may affect compliance with the Order.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order, and it is not intended to constitute an official 
interpretation of the agreement and proposed Order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 98-5534 Filed 3-3-98; 8:45 am]
BILLING CODE 6750-01-M