[Federal Register Volume 68, Number 5 (Wednesday, January 8, 2003)]
[Notices]
[Pages 1062-1065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-309]


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FEDERAL TRADE COMMISSION

[File No. 021 0171]


Baxter International, Inc., and Wyeth Corporation; Analysis 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 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 January 18, 2003.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments filed in electronic form should be 
directed to: [email protected], as prescribed below.

FOR FURTHER INFORMATION CONTACT: Joanne Lewers, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2667.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and section 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 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 December 20, 2002), on the World Wide Web, at ``http://www.ftc.gov/os/2002/12/index.htm.'' A paper copy can be obtained from 
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, 
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains 
nonpublic information, it must be filed in paper form, and the first 
page of the document must be clearly labeled ``confidential.'' Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as 
part of or as an attachment to email messages directed to the following 
email box: [email protected]. Such comments will be considered 
by the Commission and will be available for inspection and copying at 
its principal office in accordance with section 4.9(b)(6)(ii) of the 
Commission's rules of practice, 16 CFR 4.9(b)(6)(ii)).

Analysis of Agreement Containing Consent Orders To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing consent orders (``Consent 
Agreement'') from Baxter International Inc. and Wyeth. The Consent 
Agreement contains an order to maintain assets to preserve, among other 
things, the viability, marketability, and

[[Page 1063]]

competitiveness of the assets to be divested pending their divestiture. 
The Consent Agreement also contains a decision and order that is 
designed to remedy the anticompetitive effects of Baxter's proposed 
acquisition of the generic injectable pharmaceutical business of Wyeth. 
Under the terms of the Consent Agreement, the companies will be 
required to: (1) Divest all of Wyeth's assets relating to propofol to a 
Commission-approved acquirer; (2) terminate all of Baxter's rights and 
interests in GensiaSicor's pancuronium, vecuronium, and metoclopramide 
products, and divest all of its pancuronium, vecuronium, and 
metoclopramide assets to GensiaSicor; and (3) terminate Baxter's co-
marketing agreement with Watson Pharmaceuticals, Inc. by March 14, 
2004.
    The proposed Consent Agreement has been placed on the public record 
for 30 days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission will again review the agreement and any 
comments received and will decide whether it should withdraw from the 
agreement or make final the agreement's proposed Consent Order.
    Pursuant to an asset purchase agreement dated June 8, 2002, between 
Baxter and Wyeth, Baxter proposes to acquire from Wyeth substantially 
all of the assets related to Wyeth's generic injectable pharmaceutical 
business operated by Wyeth's ESI Lederle division for a total of $316 
million in cash and assumed liabilities. The Commission's complaint 
alleges that the proposed acquisition, if consummated, would constitute 
a violation of 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 the markets for the manufacture and sale of: (1) 
Propofol; (2) pancuronium; (3) vecuronium; (4) metoclopramide; and (5) 
new injectable iron replacement therapies (``NIIRTs''). The proposed 
Consent Agreement would remedy the alleged violations by replacing in 
each of these markets the lost competition that would result from the 
merger.

Propofol

    Propofol is a general anesthetic commonly used for the induction 
and maintenance of anesthesia during surgical procedures and as a 
sedative for patients who are mechanically ventilated. Although there 
are other anesthetic agents, there are many benefits associated with 
propofol including the ability to quickly adjust the amount of sedation 
and its superior safety profile. Because propofol has a short duration 
profile, it is the preferred anesthetic agent for out-patient surgery. 
Annual U.S. sales of propofol total between $375 and $400 million.
    The market for propofol is highly concentrated. AstraZeneca sells 
Diprivan[reg], the branded propofol product. Baxter markets the only 
generic propofol product, which is manufactured by GensiaSicor. Wyeth 
is seeking approval from the Food and Drug Administration (``FDA'') for 
its own propofol product, and it is one of the two best-positioned 
firms to enter the market.
    Entry into the propofol market requires lengthy development efforts 
because of the product's unique characteristics. Propofol is considered 
to be one of the most difficult injectable products to develop. Indeed, 
only one company has been able to introduce a generic propofol product. 
Propofol is manufactured using a complex process, and it requires the 
use of a preservative. The preserved formulation used for Diprivan[reg] 
and the preserved formulation used for the generic propofol marketed by 
Baxter are both protected by patents. For this reason, any new entrant 
would have to develop a propofol product using a different preservative 
that does not infringe existing patents. Once a company has developed a 
viable product, it is also required to conduct studies and obtain 
approval from the FDA to market propofol. Clinical development and FDA 
approval for this particular generic drug takes several years.
    The proposed acquisition would cause significant anticompetitive 
harm in the U.S. market for the manufacture and sale of propofol by 
eliminating potential competition between Baxter and Wyeth. With only 
two firms currently supplying propofol to customers in this market 
(Baxter and AstraZeneca), entry by Wyeth and the one other firm well-
positioned to enter would likely increase competition and reduce 
propofol prices. Accordingly, allowing Baxter to acquire Wyeth's 
generic injectable business likely would reduce the number of rivals in 
the future from four to three and force customers to pay higher prices 
for propofol.
    The proposed Consent Agreement preserves future competition in the 
market for propofol by requiring the parties to divest Wyeth's propofol 
assets to Faulding Pharmaceutical Company no later than 10 business 
days after the acquisition. Faulding is well-positioned to continue 
Wyeth's development efforts and poses no separate competitive concerns 
as the acquirer of the propofol assets. If the Commission determines 
that Faulding is not an acceptable purchaser, or that the manner of 
divestiture is not acceptable, Baxter and Wyeth must divest the 
propofol assets to a Commission-approved buyer no later than 90 
business days from the date the Order becomes final. Should they fail 
to do so, the Commission may appoint a trustee to divest the propofol 
assets. The Consent Agreement also requires the parties to license 
certain additional know-how that relates, but does not exclusively 
relate, to propofol to the propofol acquirer.
    The Consent Agreement contains several provisions designed to 
ensure that the divestiture is successful. Baxter and Wyeth are 
required to provide transitional services to the propofol acquirer 
relating to regulatory approvals and manufacturing, and in responding 
to, and defending against, any lawsuit, investigation or proceeding 
relating to propofol. The Consent Agreement also requires Baxter and 
Wyeth to provide incentives to certain employees to continue in their 
positions until the divestiture is accomplished. For a period of six 
months from the date the assets are divested, Baxter and Wyeth will 
provide the propofol acquirer an opportunity to enter into employment 
contracts with individuals who have experience relating to Wyeth's 
propofol product. Baxter and Wyeth are also required to provide 
incentives to these individuals to accept employment with the propofol 
acquirer. For a period of one year following the divestiture date, 
Baxter and Wyeth are prohibited from hiring any employees of the 
acquirer of the propofol assets who have responsibility related to 
propofol. Finally, Baxter and Wyeth must take steps to maintain the 
confidentiality of confidential information related to propofol.

Pancuronium

    Pancuronium is a rapid-onset, long-acting neuromuscular blocking 
agent used to temporarily freeze muscles during surgery or mechanical 
ventilation and to assist in the intubation process. Although 
pancuronium is an older drug, doctors continue to use it because it is 
an effective and inexpensive product with a known side-effect profile. 
The market for pancuronium in the United States is approximately $2 
million.
    Pancuronium is a small and highly concentrated market. Baxter, 
Wyeth and Abbott are the only suppliers of generic injectable 
pancuronium in the United States. Currently, Baxter, which markets 
pancuronium pursuant to an exclusive

[[Page 1064]]

agreement with GensiaSicor, accounts for almost half of U.S. sales of 
the drug. Post-acquisition, Baxter would account for 74% of the sales 
of pancuronium in the United States, and the post-acquisition 
Herfindahl-Hirschman Index (``HHI'') would be 6,152 points, 
representing a 2,496 point increase in the HHI. Post-acquisition, 
Abbott would be the only other supplier of pancuronium in the United 
States.
    The market for the manufacture and sale of pancuronium is unlikely 
to attract new entrants because pancuronium is an older drug whose 
usage and price have declined over time. Although pancuronium is still 
an important drug, companies are unlikely to devote resources to 
developing an older drug with limited sales. Even if a supplier of 
other injectable drugs decided to develop pancuronium, it would be 
costly and time consuming to complete the necessary research and 
development, and to obtain the requisite approval from the FDA. 
Consequently, entry into the pancuronium market is not likely to occur 
in a timely manner, if at all.
    The proposed acquisition would create a duopoly in the market for 
the manufacture and sale of pancuronium in the United States. Post-
acquisition, Baxter and Abbott would be the only remaining suppliers of 
pancuronium. This is likely to lead to higher prices of pancuronium.
    The proposed Consent Agreement preserves competition in the 
pancuronium market by requiring Baxter to terminate all of its rights 
and interests in GensiaSicor's pancuronium product and divest all of 
its pancuronium assets to GensiaSicor no later than five days after the 
acquisition. GensiaSicor is capable of marketing and selling its own 
pancuronium. It is a well recognized and respected company in the 
injectable pharmaceutical industry, and will be an able competitor in 
the market for the manufacture and sale of pancuronium.

Vecuronium

    Vecuronium is an intermediate-acting neuromuscular blocking agent 
that temporarily freezes muscles during surgery, mechanical 
ventilation, or intubation. Vecuronium is a popular neuromuscular 
blocking agent with a superior side effect profile. The market for the 
manufacture and sale of vecuronium in the United States is 
approximately $21 million.
    The market for the manufacture and sale of vecuronium is highly 
concentrated. Baxter markets vecuronium under an exclusive supply 
agreement with GensiaSicor. Baxter and Wyeth were the two leading 
suppliers of vecuronium in the United States, with a combined market 
share of 53%, until Wyeth temporarily suspended its vecuronium 
production in 2001. Prior to the announcement of the acquisition, Wyeth 
planned to re-enter the vecuronium market in the near future. Post-
acquisition, the HHI would be 3,598 points, representing a 1,364 point 
increase in the HHI. There are only three other suppliers of vecuronium 
in the United States. Organon continues to market its branded 
vecuronium, and Abbott and Bedford supply generic vecuronium products.
    Entry into the market for the manufacture and sale of vecuronium is 
unlikely because it is an older drug with established suppliers, and it 
is a difficult drug to manufacture. Although vecuronium continues to be 
an important drug, companies are unlikely to devote resources to 
entering this market because existing suppliers have become entrenched, 
making it difficult for new entrants to capture meaningful market 
share. In addition, vecuronium is a complicated drug to manufacture. 
Because of the unique manufacturing process involved in making 
vecuronium, entry would take longer than two years and cost hundreds of 
thousands of dollars.
    The proposed acquisition is likely to result in anticompetitive 
harm in the U.S. market for the manufacture and sale of vecuronium. 
Absent the proposed acquisition, Wyeth would have re-entered this 
market. By acquiring Wyeth's vecuronium, Baxter would likely delay or 
forego the re-launch of Wyeth's vecuronium and eliminate any associated 
price competition.
    The proposed Consent Agreement preserves future competition in the 
market for vecuronium by requiring Baxter to terminate all of its 
rights and interests in GensiaSicor's vecuronium product and divest all 
of its vecuronium assets to GensiaSicor no later than five days after 
the acquisition.

Metoclopramide

    Metoclopramide is an antiemetic used for the prevention and 
treatment of nausea and vomiting for patients undergoing certain types 
of chemotherapy and for post-operative treatment. Metoclopramide is an 
older antiemetic that continues to be used because it is effective, has 
a known safety profile, and is considerably cheaper than newer 
antiemetics. Annual U.S. sales of metoclopramide total approximately 
$13 million.
    The market for metoclopramide is highly concentrated. Wyeth 
developed the branded metoclopramide product, Reglan[reg]. Baxter is 
the exclusive supplier of GensiaSicor's metoclopramide product. Wyeth 
and Baxter together represent over half of the sales of metoclopramide 
in the United States. Post-acquisition, the HHI would be 3,852 points, 
an increase of 936 points above the pre-Acquisition HHI. Only two other 
companies supply metoclopramide in the United States: Abbott and 
Faulding.
    New entry into the market for the manufacture and sale of 
metoclopramide is difficult, expensive and unlikely to occur. 
Metoclopramide is an older drug with small sales relative to newer 
injectable anti-emetics. Therefore, firms do not consider the market 
for the manufacture and sale of metoclopramide to be an attractive 
entry opportunity. Several manufacturers have already exited the market 
and none are interested in re-entering. Even if firms that have exited 
were interested in re-launching their drugs, re-entry would likely take 
such firms an estimated two years or more.
    The proposed acquisition would cause significant anticompetitive 
harm in the U.S. market for the manufacture and sale of metoclopramide 
by reducing the number of suppliers from four to three. The combined 
entity would account for over half of all sales of metoclopramide in 
the United States. The proposed acquisition is likely to lead to higher 
prices.
    The proposed Consent Agreement preserves competition in the 
metoclopramide market by requiring Baxter to terminate all of its 
interests in GensiaSicor's metoclopramide and divest all of its 
metoclopramide assets to GensiaSicor no later than five days after the 
acquisition.

New Injectable Iron Replacement Therapies

    NIIRTs are used to treat iron deficiency in patients undergoing 
hemodialysis. NIIRTs include both injectable iron gluconate and iron 
sucrose. Annual U.S. sales of NIIRTs total approximately $225 million.
    The market for the manufacture and sale of NIIRTs is highly 
concentrated. Watson markets Ferrlecit[reg], the only injectable iron 
gluconate product available in the United States. American Regent 
markets Venofer[reg], the only injectable iron sucrose product in the 
United States. Watson recently entered into a co-promotional agreement 
with Baxter, pursuant to which Baxter promotes Ferrlecit[reg].
    Entry into the market for the manufacture and sale of NIIRTs is 
very difficult and time consuming. Because

[[Page 1065]]

of FDA-imposed New Chemical Entity exclusivity periods, the earliest 
that any company could file for regulatory approval of a generic iron 
gluconate product is February 2004. Similar provisions protect iron 
sucrose, though its exclusivity period expires in November 2003. Entry 
into the market for the manufacture and sale of NIIRTs is further 
complicated by a lack of raw material suppliers. Even if a new entrant 
were to locate a raw material supplier, both iron gluconate and iron 
sucrose are difficult products that would take more than two years to 
develop. Wyeth is the best-positioned firm to successfully develop a 
NIIRT product.
    The proposed acquisition is likely to have anticompetitive effects 
in the market for the manufacture and sale of NIIRTs in the United 
States because it would eliminate potential competition between Baxter 
and Wyeth. The proposed acquisition would remove Wyeth as the best-
positioned independent entrant into this market and prevent all 
associated price competition.
    The proposed Consent Agreement preserves future competition in the 
market for the manufacture and sale of NIIRTs by requiring Baxter to 
terminate its co-marketing agreement with Watson within weeks of the 
expiration of Ferrlicit[reg]'s New Chemical Entity exclusivity. This 
termination provides an incentive for Baxter to continue developing and 
ultimately launch the iron gluconate product that it will acquire from 
Wyeth.
    Pursuant to the terms of the Order, the Commission has appointed 
William E. Hall as a Monitor Trustee to ensure Baxter's and Wyeth's 
compliance with all of the requirements of the Order. Mr. Hall has over 
30 years of experience in the pharmaceutical industry and is well-
respected in the industry. In order to ensure that the Commission 
remains informed about the status of the proposed divestitures and the 
transfers of assets, the Consent Agreement requires Baxter and Wyeth to 
file reports with the Commission periodically until the divestitures 
are accomplished.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.

    By direction of the Commission.
C. Landis Plummer,
Acting Secretary.
[FR Doc. 03-309 Filed 1-7-03; 8:45 am]
BILLING CODE 6750-01-P