[Federal Register Volume 68, Number 77 (Tuesday, April 22, 2003)]
[Notices]
[Pages 19827-19831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9855]


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FEDERAL TRADE COMMISSION

[File No. 021 0192]


Pfizer Inc. and Pharmacia 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 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 14, 2003.

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

FOR FURTHER INFORMATION CONTACT:  Elizabeth Jex, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580, 
(202) 326-3273.

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 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 April 14, 2003), on the World Wide Web, at ``http://www.ftc.gov/
os/2003/04/index.htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, N.W., 
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. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, N.W., Washington, D.C. 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 Proposed 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 Pfizer Inc. (``Pfizer'') and Pharmacia Corporation 
(``Pharmacia'') which is designed to remedy the anticompetitive effects 
of the acquisition of Pharmacia by Pfizer. Under the terms of the 
proposed

[[Page 19828]]

Consent Agreement, the companies would be required to: (1) divest all 
of Pfizer's worldwide rights and assets relating to its overactive 
bladder drug, darifenacin, to Novartis AG; (2) divest Pfizer's 
worldwide rights and assets relating to its combination hormone 
replacement therapy, femhrt, to Galen Holdings plc; (3) return to 
Nastech Pharmaceutical Company, Inc. all rights to make, use, and sell 
Nastech's intranasal apomorphine product (``IN APO'') for the treatment 
of erectile dysfunction; (4) divest all of Pharmacia's rights and 
assets in the field of sexual dysfunction relating to its D2 dopamine 
receptor agonist, PNU-142,774, to Neurocrine Biosciences, Inc.; (5) 
renegotiate a 1999 license and supply agreement between Pharmacia and 
Novartis for Deramaxx, Novartis's canine arthritis drug, to enable 
Novartis to operate as an independent competitor, rather than a 
partner, of the merged entity; (6) divest all of Pfizer's U.S. rights 
and assets relating to its lactating cow and dry cow mastitis products 
to Schering-Plough Corporation; (7) divest all of Pharmacia's worldwide 
rights and assets relating to its over-the-counter hydrocortisone-based 
cream, Cortaid, to Johnson & Johnson (``J&J''); (8) divest all of 
Pfizer's U.S. and Puerto Rican rights and assets relating to its over-
the-counter motion sickness product, Bonine, to Insight Pharmaceuticals 
Corporation; and (9) divest all of Pfizer's worldwide rights and assets 
relating to its Halls over-the-counter cough drop business to Cadbury 
Schweppes plc.
    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, and will decide whether it 
should withdraw from the proposed Consent Agreement or make final the 
Decision and Order (``Order'').
    Pursuant to an Agreement and Plan of Merger dated July 13, 2002, 
between Pfizer and Pharmacia, Pfizer proposes to acquire 100 percent of 
the issued and outstanding shares of Pharmacia in a stock-for-stock 
transaction valued at approximately $60 billion. 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. Sec.  18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. Sec.  45, in the markets for: (1) extended release 
treatments for overactive bladder; (2) combination hormone replacement 
therapy products; (3) treatments for erectile dysfunction; (4) 
treatments for canine arthritis; (5) treatments for lactating cow 
mastitis; (6) treatments for dry cow mastitis; (7) over-the-counter 
hydrocortisone creams and ointments; (8) over-the-counter motion 
sickness medications; and (9) over-the-counter cough drops. The 
proposed Consent Agreement will remedy the alleged violations by 
replacing the lost competition that would result from the merger in 
each of these markets.

Extended Release Treatments for Overactive Bladder

    Extended release drugs for the treatment of overactive bladder 
(``OAB'') are used by over 2.4 million Americans. Extended release OAB 
drugs help to reduce or eliminate the three primary symptoms of OAB 
frequency, urgency, and urge incontinence to enable OAB patients to 
live normal, active lives. Extended release products, dosed at once or 
twice-a-day, offer a more convenient dosing schedule and fewer side 
effects than older, generic products that must be taken three-times-a-
day. Annual sales of extended release OAB products total $760 million 
in the United States, and the market is growing rapidly.
    The U.S. market for extended release OAB products is a duopoly. 
Pharmacia markets Detrol and Detrol LA, twice and once-a-day products, 
respectively. J&J markets Ditropan XL, the only other extended release 
OAB product available in the United States. Pfizer is seeking approval 
from the Food and Drug Administration (``FDA'') to market its own 
extended release product, darifenacin, and is one of the two best-
positioned firms seeking to enter the market.
    Entry into the market for extended release OAB products is 
difficult, time-consuming, and costly. De novo entry is estimated to 
take at least eight years and cost upwards of $375 million. Pfizer, 
along with one other company, Yamanouchi Pharma America 
(``Yamanouchi''), are the only two firms well-positioned to enter the 
market within the next two years. Other firms that have undertaken 
efforts to develop an extended release OAB product are well behind 
Pfizer and Yamanouchi.
    The proposed acquisition would cause significant anticompetitive 
harm in the U.S. market for extended release OAB products by 
eliminating potential competition between Pfizer and Pharmacia. With 
only two firms currently marketing extended release OAB products to 
customers in this market (Pharmacia and J&J), the entry of Pfizer and 
Yamanouchi would likely increase competition and reduce prices for 
extended release OAB products. Accordingly, allowing Pfizer to control 
both the Pharmacia extended release OAB products and its own competing 
product would reduce the number of rivals in the future from four to 
three and likely force customers to pay higher prices for extended 
release OAB products. The proposed acquisition would also reduce 
competition in the research and development of extended release OAB 
products.
    The proposed Consent Agreement therefore requires the parties to 
divest Pfizer's extended release OAB product, darifenacin, to Novartis 
AG no later than ten business days after the Pharmacia acquisition is 
consummated. Novartis is well-positioned to continue Pfizer's 
development efforts and poses no separate competitive concerns as an 
acquirer of the darifenacin assets. If the Commission determines that 
Novartis is not an acceptable purchaser, or if the manner of the 
divestiture is not acceptable, Pfizer and Pharmacia must divest the 
darifenacin assets to a Commission-approved buyer no later than six 
months from the date the Order becomes final. Should they fail to do 
so, the Commission may appoint a trustee to divest the darifenacin 
assets.
    The proposed Consent Agreement contains several provisions designed 
to ensure that the divestiture is successful. Pfizer and Pharmacia are 
required to provide transitional services to the darifenacin buyer 
relating to regulatory approvals and manufacturing of darifenacin. 
Pfizer is required to continue contract manufacturing darifenacin until 
Novartis obtains the FDA approvals necessary to manufacture darifenacin 
independently from Pfizer. The proposed Consent Agreement also requires 
Pfizer and Pharmacia to provide incentives to certain employees to 
continue in their positions until the divestiture is accomplished. For 
a period of 18 months from the date the assets are divested, Pfizer and 
Pharmacia will provide the darifenacin buyer an opportunity to enter 
into employment contracts with individuals who have experience relating 
to darifenacin. Pfizer and Pharmacia are also required to provide 
incentives to these individuals to accept employment with the 
darifenacin acquirer. For a period of one year following the 
divestiture date, Pfizer and Pharmacia are prohibited from hiring any 
employees of the acquirer of the darifenacin assets who have 
responsibility related to darifenacin. Finally, Pfizer and Pharmacia 
must take steps to maintain

[[Page 19829]]

the confidentiality of certain information related to darifenacin.

Combination Hormone Replacement Therapies

    Combination hormone replacement therapies (``HRT''), which consist 
of both estrogen and progestin, are used by women with intact uteri to 
control moderate to severe menopausal symptoms. Although recent safety 
concerns have been raised by the National Institutes of Health 
(``NIH'') about long term use of HRT, there are no effective substitute 
products available to control menopausal symptoms. Total sales of 
combination HRT products in the United States in 2002 were 
approximately $807 million.
    The market for combination HRT is highly concentrated. There are 
three significant competitors in the combination HRT market: Wyeth, 
Pfizer, and Pharmacia. Post-acquisition, the top two competitors Wyeth 
and Pfizer would control almost 94 percent of the combination HRT 
market.
    Entry into the market for combination HRT products is difficult, 
time-consuming, and costly. Additionally, because of the safety 
concerns raised by the NIH's Women's Health Initiative study, a new 
entrant into the combination HRT market may need to meet higher 
standards to receive FDA approval. The expected entry of generic 
competitors for combination HRT products is more than two years away.
    The proposed acquisition would further concentrate the market for 
combination HRT products and eliminate competition between Pfizer and 
Pharmacia. The loss of Pharmacia as an independent competitor in the 
combination HRT market would likely result in higher prices and fewer 
product choices for consumers.
    The proposed Consent Agreement preserves competition in the 
combination HRT market by requiring the parties to divest Pfizer's 
combination HRT product, femhrt, to Galen Holdings plc no later than 
ten business days after the Pharmacia acquisition is consummated. Galen 
is well-positioned to market femhrt because it is a company that 
specializes in marketing women's health products, including an oral 
contraceptive and an estrogen-only HRT product. However, if the 
Commission determines that Galen is not an acceptable purchaser, or if 
the manner of the divestiture is not acceptable, Pfizer and Pharmacia 
must divest the femhrt assets to a Commission-approved buyer no later 
than six months from the date the Order becomes final. Should they fail 
to do so, the Commission may appoint a trustee to divest the femhrt 
assets.
    The proposed Consent Agreement contains several provisions designed 
to ensure that the divestiture of femhrt is successful by requiring the 
parties to divest all of Pfizer's rights and assets relating to femhrt, 
including all historical research and development data, sales and 
marketing materials, and intellectual property. For a period of six 
months from the date the assets are divested, Pfizer and Pharmacia will 
provide the femhrt buyer an opportunity to enter into employment 
contracts with individuals who have experience relating to femhrt. For 
a period of one year following the divestiture date, Pfizer and 
Pharmacia are prohibited from hiring any employees of the acquirer of 
the femhrt assets who have responsibility related to femhrt. Pfizer and 
Pharmacia must also take steps to maintain the confidentiality of 
certain information related to femhrt. Finally, Pfizer would continue 
to package femhrt at its Puerto Rico facility until another packager is 
brought online by the acquirer of the femhrt assets.

Treatments for Erectile Dysfunction

    Erectile dysfunction (``ED'') affects 30 million men in the United 
States and half of the male population between the ages of 40 and 70. 
Approximately 4 million men take prescription drugs to treat ED. The 
U.S. market for drugs to treat ED is valued at over $1 billion today 
and is expected to exceed $1.5 billion by 2005 as the population ages 
and as awareness of the condition increases.
    Pfizer dominates the ED market with its well-known product, Viagra. 
Pfizer has a market share in the United States in excess of 95 percent. 
Pfizer also has a second-generation Viagra-like product in development 
for ED. Pharmacia currently has two products in clinical development 
for ED: IN APO and PNU-142,774.
    With the exception of Pharmacia's two products in development, 
entry into the market for drugs to treat ED is unlikely. Pfizer owns an 
extensive patent portfolio which protects Viagra. Patent litigation 
initiated by Pfizer with the most significant potential entrants is 
likely to prevent entry in the next two years.
    The proposed acquisition would cause significant anticompetitive 
harm in the U.S. market for drugs to treat ED by eliminating potential 
competition between Pfizer and Pharmacia. Given Pfizer's position as a 
monopolist in the ED market, entry by Pharmacia would increase 
competition and reduce prices in the market. Accordingly, allowing 
Pfizer to acquire Pharmacia's two ED products in development would 
preserve Pfizer's monopoly in the ED market in the future.
    The proposed Consent Agreement therefore requires Pharmacia to 
return all of its rights in one of its products, IN APO, to Nastech 
Pharmaceutical Company, Inc. and to divest all of its rights and 
interests in its other product, PNU-142,774, for the field of human 
sexual dysfunction to Neurocrine Biosciences, Inc., within ten business 
days after the Pharmacia acquisition is consummated. Both Nastech and 
Neurocrine have sufficient research and development expertise to 
continue development of the products that each is obtaining from 
Pharmacia.
    The proposed Consent Agreement requires Pfizer and Pharmacia to 
ensure that the divestitures to Nastech and Neurocrine are successful. 
Pfizer and Pharmacia are required to provide Nastech and Neurocrine the 
opportunity to enter into employment contracts with individuals who 
have experience relating to IN APO or PNU-142,774. For a period of one 
year following the divestiture date, Pfizer and Pharmacia are 
prohibited from hiring any employees of the acquirers of the IN APO or 
PNU-142,774 assets who have responsibility related to the products. 
Pfizer and Pharmacia must also take steps to maintain the 
confidentiality of certain information related to IN APO or PNU-142-
774.

Treatments for Canine Arthritis

    Canine arthritis affects an estimated 8.5 million of all dogs in 
the United States. Approximately 1.8 million arthritic dogs are treated 
with prescription canine arthritis drugs. Sales for prescription canine 
arthritis drugs in the United States in 2001 totaled approximately $81 
million, and the U.S. market is expected to grow to over $110 million 
by the end of 2003.
    The market for prescription canine arthritis drugs is highly 
concentrated. Pfizer markets Rimadyl, the leading product in the U.S. 
market that held a 70 percent market share in 2001. Wyeth, through its 
Fort Dodge Animal Health division, markets EtoGesic. Through a license 
and supply agreement with Pharmacia, Novartis launched its own canine 
arthritis product, Deramaxx, in February 2003.
    Entry into the market of drugs to treat canine arthritis is 
difficult, costly, and time-consuming. Besides the safety and efficacy 
testing required for FDA approval of canine arthritis drugs, firms 
entering the market must develop palatable dosing formulations for use 
at home. Achieving a palatable delivery

[[Page 19830]]

mechanism for dogs is a difficult task and, if not done successfully, 
can compromise the success of a new drug.
    Likely and timely entry is only possible by companies already in 
late stages of clinical development or awaiting regulatory approval. 
There are only two entities, Schering-Plough Corporation and a joint 
venture of Boehringer Ingelheim GmbH and Merial, that have prescription 
canine products approved in Europe and in late clinical development in 
the United States and are expected to enter in the U.S. market in the 
near future. Customers have stated that entry by these firms within the 
next year will not be sufficient to counter the anticompetitive effects 
posed by the acquisition of Pharmacia by Pfizer.
    The proposed acquisition is likely to result in anticompetitive 
harm in the U.S. market for drugs to control the pain and inflammation 
associated with canine arthritis. Because of the license and supply 
agreement with Novartis, Pfizer, the leading company in the market, 
would have undue control over the supply of product needed by Novartis, 
and access to the competitively sensitive information of its 
competitor. As a result, Pfizer would be in a position to undermine the 
competitive position of one of only two competitors in the market for 
prescription drugs to treat canine arthritis.
    The proposed Consent Agreement preserves competition in the market 
for prescription canine arthritis drugs by requiring Pharmacia to 
renegotiate its pre-existing license and supply agreement with Novartis 
to allow Novartis to operate as an independent competitor rather than a 
business partner. Specifically, the proposed Consent Agreement: (1) 
eliminates the control that Pfizer would have over Novartis's product; 
(2) restricts the type of information Pfizer would be able to obtain 
about Deramaxx; and (3) allows Novartis to compete with Pfizer in the 
development of a second generation canine arthritis product.

Treatments for Lactating Cow and Dry Cow Mastitis

    Bovine mastitis, an infection of the udder of the cow, costs the 
U.S. dairy industry $2 billion annually. There are two different types 
of contagious bovine mastitis: (1) lactating cow mastitis; and (2) dry 
cow mastitis. Lactating cow mastitis occurs when the cow is producing 
milk, while dry cow mastitis occurs when the cow is not producing milk. 
Antibiotics used to treat lactating cow mastitis are different from 
those used to treat dry cow mastitis, and strict FDA regulations 
preclude the use of one product to treat the other type of infection. 
In the United States, $27 million worth of lactating cow mastitis 
antibiotic products and $25.5 million worth of dry cow mastitis 
antibiotic products are sold annually.
    The U.S. market for bovine mastitis treatments is highly 
concentrated. There are only three significant competitors in the 
markets for lactating cow and dry cow mastitis antibiotics products 
Pharmacia, Wyeth, and Pfizer. Post-acquisition, Pfizer would account 
for 50 percent of the sales of lactating cow mastitis products and 55 
percent of the sales of dry cow mastitis products. Wyeth would be the 
only other significant competitor in the markets for bovine mastitis 
treatments.
    Entry into the markets for treatments for bovine mastitis is 
difficult, expensive, and time-consuming. Besides FDA approval of the 
drug, successful entry requires: (1) the ability to offer both 
lactating cow and dry cow products; (2) a dedicated veterinarian sales 
force experienced in selling and supporting dairy products; (3) a broad 
line of bovine health products other than mastitis treatments, such as 
parasiticides, vaccines, reproductive products, and antibiotics to 
treat other infections; and (4) a good reputation within the dairy 
community. Consequently, successful new entry into the market for 
bovine mastitis antibiotics treatments is not likely to occur in a 
timely fashion, if at all.
    The proposed acquisition would further concentrate the market for 
antibiotics for the treatment of bovine mastitis in the United States. 
Post-acquisition, Pfizer and Wyeth would be the only significant 
suppliers. This is likely to lead to higher prices for drugs used to 
treat bovine mastitis.
    The proposed Consent Agreement preserves competition in the market 
for antibiotics for the treatment of bovine mastitis by requiring 
Pfizer to divest all of its U.S. rights to its bovine mastitis 
antibiotic products to Schering-Plough Corporation no later than ten 
business days after the Pharmacia acquisition is consummated. Schering-
Plough is well-positioned to replace Pfizer in the bovine mastitis 
treatment market because it is the fifth largest animal health company 
in the United States, has a veterinarian sales and support system, and 
already has established a good reputation in the dairy community. 
However, if the Commission determines that Schering-Plough is not an 
acceptable purchaser, or if the manner of the divestiture is not 
acceptable, Pfizer and Pharmacia must divest Pfizer's bovine mastitis 
assets to a Commission-approved buyer no later than six months from the 
date the Order becomes final. Should they fail to do so, the Commission 
may appoint a trustee to divest the assets.

Over-the-Counter Hydrocortisone Creams and Ointments

    Creams and ointments containing the active ingredient 
hydrocortisone are used to treat a variety of skin conditions, 
including chronic dry skin, seborrheic dermatitis, eczema, and 
psoriasis. Annual sales of over-the-counter (``OTC'') hydrocortisone 
creams and ointments in the United States are approximately $160 
million.
    The U.S. market for OTC hydrocortisone creams and ointments is 
highly concentrated. There are only two branded competitors in the 
market: (1) Pfizer, with its Cortizone brand; and (2) Pharmacia, with 
its Cortaid brand. Although private label OTC hydrocortisone creams and 
ointments also account for a significant share of the market, these 
products have limited competitive significance and virtually no impact 
on the pricing of the products sold by Pfizer and Pharmacia. Post-
acquisition, Pfizer would account for 55 percent of the OTC sales of 
hydrocortisone creams and ointments, and would be left with no 
significant branded competitor in this market.
    Entry into the market for OTC hydrocortisone creams and ointments 
is unlikely to deter or counteract the effects the proposed transaction 
will have on competition. A new entrant would have to invest a 
significant amount of time and money to achieve any meaningful 
competitive presence in this market. Because of the limited sales 
opportunities and the difficult task of convincing retailers to take 
shelf space away from established brands, it is unlikely that a new 
entrant could enter the market and achieve any significant market 
impact within two years.
    The proposed acquisition would cause significant anticompetitive 
harm in the U.S. market for OTC hydrocortisone creams and ointments by 
eliminating competition between Pfizer and Pharmacia. The loss of 
Pharmacia as an independent competitor in this market would likely 
result in higher prices for consumers.
    The proposed Consent Agreement preserves competition in the market 
for OTC hydrocortisone creams and ointments by requiring Pharmacia to 
divest its Cortaid business to J&J no later than ten business days 
after the Pharmacia acquisition is consummated. J&J is a well-
positioned purchaser because it currently markets many other well-known 
OTC products and has

[[Page 19831]]

established relationships with customers. However, if the Commission 
determines that J&J is not an acceptable purchaser, or if the manner of 
the divestiture is not acceptable, Pfizer and Pharmacia must divest 
Pharmacia's Cortaid business to a Commission-approved buyer no later 
than six months from the date the Order becomes final. Should they fail 
to do so, the Commission may appoint a trustee to divest the assets.

Over-the-Counter Motion Sickness Medications

    Motion sickness is an ailment that occurs when the components of 
the brain that gauge motion, such as the inner ear and the eyes, send 
conflicting messages to the brain. When this occurs, symptoms such as 
dizziness, headache, sweating, and vomiting can occur. OTC motion 
sickness medications treat this ailment by using certain antihistamines 
to block the conflicting messages sent to the brain. Annual sales of 
OTC motion sickness medications total approximately $45 million in the 
United States.
    The U.S. market for OTC motion sickness medications is highly 
concentrated. Pfizer, with its Bonine product, and Pharmacia, with its 
Dramamine product, are the two leading suppliers in this market, with a 
combined market share of 77 percent. Even after several years on the 
market, the third leading brand name product, Marezine, has less than 5 
percent of the market. The remainder of the market is accounted for by 
private label products that do not constrain the pricing of the branded 
products.
    New entry into the market for OTC motion sickness medications is 
unlikely to be sufficient to counteract the anticompetitive effects of 
the proposed acquisition. The small size of the market, coupled with 
the significant investment needed to market and sell the products, make 
it unlikely that a new competitor will enter the market in the next two 
years.
    Pfizer's proposed acquisition of Pharmacia would cause significant 
anticompetitive harm in the U.S. market for OTC motion sickness 
medications. The combined entity would account for 77 percent of all 
sales of OTC motion sickness medications, and the proposed acquisition 
is likely to lead to higher prices in this market.
    The proposed Consent Agreement effectively remedies the proposed 
acquisition's anticompetitive harm in the U.S. market for OTC motion 
sickness medications by requiring Pfizer to divest its U.S. and Puerto 
Rican Bonine assets to Insight Pharmaceuticals Corporation no later 
than ten business days after the Pharmacia acquisition is consummated. 
Insight is a well-positioned purchaser of the Bonine assets because it 
already has a portfolio of more than fifteen OTC consumer healthcare 
products, including Allerest, Sucrets, Cepastat, Caldecort, Fiberall, 
N'Ice, and Nostrilla. Through these other brands, Insight already has 
significant experience in selling OTC medications and has strong 
relationships with drugstores, food stores, and mass merchandisers. 
However, if the Commission determines that Insight is not an acceptable 
purchaser, or if the manner of the divestiture is not acceptable, 
Pfizer and Pharmacia must divest the Bonine assets to a Commission-
approved buyer no later than six months from the date the Order becomes 
final. Should they fail to do so, the Commission may appoint a trustee 
to divest the Bonine assets.

Over-the-Counter Cough Drops

    Millions of people in the United States use cough drops to treat 
the coughing associated with colds or other ailments. Cough drops are 
hard, candy-like confectionary products that contain medications such 
as menthol or dextromethorphan. Annual sales of cough drops in the 
United States are about $240 million.
    The OTC cough drop market is highly concentrated, with only two 
significant competitors with brand name products: (1) Pfizer, with its 
Halls brand; and (2) Pharmacia, with its Ludens brand. Private label 
products, once again, have little competitive significance and do not 
constrain the pricing of the branded products. After the acquisition, 
Pfizer would account for approximately 63 percent of the OTC cough drop 
market.
    Entry into the market for the manufacture and sale of OTC cough 
drops is unlikely to occur. Entry requires the investment of extremely 
high sunk costs which would be difficult to justify given the 
relatively limited sales opportunities. Thus, entry is not likely to 
deter or counteract the effect of the proposed acquisition.
    The proposed acquisition would eliminate competition between Pfizer 
and Pharmacia in the U.S. market for OTC cough drops. The loss of 
Pharmacia as an independent competitor in the OTC cough drop market is 
likely to lead to higher prices for consumers.
    The proposed Consent Agreement effectively remedies the 
acquisition's anticompetitive effects in the U.S. market for OTC cough 
drops by requiring Pfizer to divest its Halls cough drop business to 
Cadbury Schweppes no later than ten business days after the Pharmacia 
acquisition is consummated. Cadbury is acquiring Pfizer's entire Adams 
Division, which markets Halls cough drops, as well as many other 
confectionary products. Cadbury is one of the world's leading beverage 
and confectionary companies and as such, is well-positioned to market 
the Halls brand of cough drops.

Interim Monitor

    The Commission has appointed Francis J. Civille as Interim Monitor 
to oversee the asset transfers and to ensure Pfizer and Pharmacia's 
compliance with all of the provisions of the proposed Consent 
Agreement. Mr. Civille has over 33 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 proposed Consent 
Agreement requires Pfizer and Pharmacia to file reports with the 
Commission periodically until the divestitures and transfers are 
accomplished.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Consent Agreement or to modify 
its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-9855 Filed 4-21-03; 8:45 am]
BILLING CODE 6750-01-S