[Federal Register Volume 69, Number 164 (Wednesday, August 25, 2004)]
[Notices]
[Pages 52270-52274]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19443]


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FEDERAL TRADE COMMISSION

[File No. 041 0025]


Cephalon, Inc., et al.; 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 September 8, 2004.

ADDRESSES: Comments should refer to ``Cephalon, Inc., et al., File No. 
041 0025,'' to facilitate the organization of comments. A comment filed 
in paper form should include this 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-159, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, as explained in the 
Supplementary Information section. 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. 
Comments filed in electronic form (except comments containing any 
confidential material) should be sent to the following e-mail box: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Elizabeth Jex, FTC, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 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 August 9, 2004), on the World Wide Web, at ``http://www.ftc.gov/os/2004/08/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. Written comments must be submitted 
on or before September 8, 2004. Comments should refer to ``Cephalon, 
Inc., et al., File No. 041 0025,'' to facilitate the organization of 
comments. A comment filed in paper form should include this 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-159, 600 Pennsylvania Avenue, NW., Washington, DC 
20580. If the comment contains any material for which confidential 
treatment is requested, it must be filed in paper (rather than 
electronic) form, and the first page of the document must be clearly 
labeled ``Confidential.'' \1\ 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. 
Comments filed in electronic form should be sent to the following e-
mail box: [email protected].
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). 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 Commission Rule 4.9(c), 16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in

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paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC Web site, to the extent 
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC 
makes every effort to remove home contact information for individuals 
from the public comments it receives before placing those comments on 
the FTC Web site. More information, including routine uses permitted by 
the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Cephalon, Inc. and Cima Labs, Inc., which is designed 
to remedy the anticompetitive effects of the acquisition of Cima by 
Cephalon. Under the terms of the proposed Consent Agreement, Cephalon 
would be required to grant to a third party company, a fully paid-up, 
irrevocable license to make and sell a generic equivalent of its 
breakthrough cancer pain (``BTCP'') drug Actiq in the United States.
    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 November 3, 2003, 
between Cephalon and Cima, Cephalon proposes to acquire 100 percent of 
the issued and outstanding shares of Cima in a stock-for-stock 
transaction valued at approximately $515 million. Cephalon also intends 
to pay consideration such that each issued and outstanding share of 
Cima common stock will be converted into the right to receive $34.00 in 
cash. 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 market for 
prescription drug products indicated for the treatment of BTCP. The 
proposed Consent Agreement will remedy the alleged violations by 
replacing the lost potential competition that would result from the 
merger in this market.
    Drugs for the treatment of BTCP help to reduce or eliminate the 
spikes of intense pain experienced by patients receiving opioid therapy 
for their chronic pain. By providing a faster onset of pain relief than 
short-acting oral opioids, BTCP products allow patients to be more 
active. Because many patients with BTCP are not in hospitals, BTCP 
products are self-administered and produced in a convenient and 
portable dosage form. These characteristics of BTCP medications provide 
terminally ill cancer patients a significant improvement to the quality 
of their lives. Annual sales of BTCP drugs total more than $200 million 
in the United States, and the market is growing rapidly.
    The U.S. market for drugs to treat BTCP is a monopoly. Cephalon 
markets Actiq, the only product currently indicated for the treatment 
of BTCP on the market. Actiq is a fentanyl-containing, berry-flavored 
lollipop. Cephalon is also developing a sugar free formulation of Actiq 
which it expects to launch in 2005. Cima is in Phase III of clinical 
development of its OraVescent fentanyl (``OVF'') product, which is a 
fast-dissolving, effervescent, sugar-free fentanyl tablet. Cima intends 
to seek approval from the Food and Drug Administration (``FDA'') by the 
end of 2004 or in the first quarter of 2005. OVF is expected to enter 
the U.S. market in 2006 or 2007 and is the product best-positioned to 
enter the U.S. market and compete with Cephalon's Actiq.
    Both branded and generic entry into the market for BTCP products is 
difficult, time consuming, and costly. Cima is the firm best positioned 
to enter the market. Other firms that have undertaken efforts to 
develop BTCP products are well behind Cima. In fact, entry in the BTCP 
market by any other branded or generic firm is not expected to occur 
until at least 2008. Both generic and branded entry is delayed by 
numerous barriers, including intellectual property, regulatory, 
technological, manufacturing, and marketing. Entry, therefore, would 
not be likely, timely, or sufficient to counteract the anticompetitive 
effects of the acquisition.
    The proposed acquisition would cause significant anticompetitive 
harm in the U.S. market for BTCP products by eliminating potential 
competition between Cephalon and Cima. With only one firm currently 
marketing a BTCP drug to customers in this market (Cephalon), the entry 
of Cima likely would increase competition and reduce prices for drugs 
indicated for the treatment of BTCP. Accordingly, allowing Cephalon to 
control both Cima's product and its own potentially competing product 
would reduce the number of rivals in the future from two to one and 
likely force customers to pay higher prices for their BTCP drugs. 
Moreover, Cephalon's ownership of both products will allow it to 
undermine generic entry by shifting patients to the patent-protected 
OVF product prior to generic launch, depriving consumers of the full 
benefits of generic competition.
    The proposed Consent Agreement therefore requires Cephalon to grant 
a license and transfer all of its technological know-how and 
intellectual property related to Actiq (``Actiq license assets'') to an 
upfront buyer no later than ten days after the acquisition is 
consummated. Cephalon has selected Barr Laboratories, Inc. (``Barr'') 
as the upfront buyer. Barr is a reputable generic manufacturer and is 
well-positioned to manufacture a generic version of Actiq. If the 
Commission determines that Barr is not an acceptable purchaser, or if 
the manner of the grant, license, delivery or conveyance is not 
acceptable, Cephalon and Cima must rescind the transaction with Barr 
and grant, license, deliver or otherwise convey the Actiq license 
assets to a Commission-approved buyer not 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 Actiq license assets.
    The proposed remedy contains several provisions designed to ensure 
the successful and timely development of OVF, sugar-free Actiq, and 
generic Actiq. Cephalon must transfer all of its technological know how 
and intellectual property related to both the sugar and sugar free 
formulations of Actiq to Barr immediately in accordance with the terms 
of the Cephalon/Barr License and Supply Agreement. In the event that 
Barr is not able to manufacture an FDA-approved generic version of 
Actiq by the date the licenses take effect, the Order requires Cephalon 
to supply Barr with Actiq to be marketed as a generic. The Order also 
contains date certain provisions that provide incentives for Cephalon 
not to delay the development and launch of OVF or sugar-free Actiq. The 
licenses for the marketing rights for sugar and sugar-free Actiq are 
triggered by dates certain. These dates certain triggers provide 
Cephalon with a strong incentive to launch OVF as soon as possible or 
risk Barr's launch of generic Actiq even before Cephalon's OVF. 
Further, the Order contains provisions that require Cephalon to timely 
develop the sugar free formulation by a date

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certain, or if it fails to do so, to license Barr five months earlier. 
With the licenses and technology transfer provided by Cephalon, Barr 
will be able to compete aggressively in the BTCP market against Actiq. 
The proposed remedy also prohibits Cephalon from making certain 
regulatory filings that would delay FDA approval of Barr's generic 
Actiq. These provisions ensure that Barr will be in a position to 
launch a generic version of Actiq no later than OVF launch, eliminating 
the anticompetitive effects of the proposed acquisition and providing 
patients with earlier access to a lower priced generic product.
    Normally a generic remedy would not be sufficient to solve the 
anticompetitive problems raised by a merger of two branded 
pharmaceutical competitors because it does not replace the lost 
promotion and innovation competition between branded companies. In this 
case, the evidence showed that there is not likely to be any further 
innovation competition between Cephalon and Cima because, among other 
things, Actiq is near the end of its patent life. Moreover, Actiq and 
OVF are both formulations of fentanyl, a readily-available, non-
patented active ingredient. The facts showed that an important 
anticompetitive effect of the merger was to defeat generic competition. 
The evidence in this case also suggests that, regardless of the merger, 
Cephalon will no longer promote the sugar-based Actiq formulation after 
OVF's launch. Finally, any lost brand-to-brand price competition which 
would have occurred between Cephalon and Cima is more than restored by 
the early entry of lower priced generic versions of sugar and sugar-
free Actiq. As a result, the generic remedy replaces the lost price 
competition that likely would have occurred. The proposed remedy would 
bring significant benefits to patients and would reverse the 
anticompetitive effects of the proposed acquisition.
    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, Commissioner Thompson 
dissenting, and Commissioner Harbor recused.
Donald S. Clark,
Secretary.

Statement of the Commission

    Today, the Commission released a proposed complaint and accepted 
for public comment a proposed consent order that obtains significant 
relief regarding Cephalon Inc.'s proposed acquisition of Cima Labs, 
Inc. The complaint alleges that the acquisition may substantially 
lessen competition in the market for the manufacture and sale of 
prescription drug products to treat breakthrough cancer pain (BTCP). 
These medications bring many cancer patients significant improvement in 
the quality of their lives. Cephalon's product Actiq is the only 
treatment on the market indicated for BTCP. Cima Labs is developing 
oravescent fentanyl (OVF), which is in Phase III clinical trials and is 
the product best positioned to enter the market.
    To address potential anticompetitive effects that may arise from 
the transaction as originally contemplated, the Commission has required 
the merging parties to grant a license and transfer all of the 
technological know-how for Actiq to Barr Laboratories, Inc., a leading 
generic drug manufacturer. This transfer will significantly expedite 
the entry of a generic BTCP product. Our experience and the empirical 
literature \1\ demonstrate that the entry of a generic BTCP product 
will provide a substantially lower-priced alternative to consumers and 
thereby significantly lower the average price of BTCP medication. The 
availability of a substantially lower-priced BTCP medication will be 
particularly important for patients on limited budgets or without 
insurance.
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    \1\ This literature is reviewed at Generic Drug Entry Prior to 
Patent Expiration: An FTC Study 9 (July 2002).
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    Normally, creation of a generic competitor would be insufficient to 
solve the anticompetitive problems raised by a merger of two branded 
pharmaceutical competitors. In the usual case, such a remedy would not 
replace the lost promotion and innovation competition between the 
branded companies regarding the particular illness the companies 
competed to treat. In this case, however, the facts showed that an 
important anticompetitive effect of the merger was to defeat generic 
competition. The facts further showed that there is not likely to be 
any further innovation competition between Cephalon and Cima for BTCP 
products because, among other things, Actiq is near the end of its 
patent life and neither Cephalon nor Cima has any other BTCP products 
in the pipeline. Moreover, Actiq and OVF are both formulations of 
fentanyl, a readily-available, non-patented active ingredient.
    The earlier entry of lower-priced generic Actiq, made possible by 
the remedy, will more than restore any loss in brand-to-brand price 
competition that would have occurred between Cephalon and Cima. The 
average price that consumers will pay for BTCP medication will be lower 
after the merger and the proposed remedy than it would have been 
without the merger and remedy. In addition, the consent order ensures 
that the competition between Actiq and its generic equivalent will be 
robust. Because the generic product should be on the market no later 
than the launch of OVF,\2\ Cephalon will be unable to shift patients 
preemptively to OVF to undermine generic competition. Thus, the 
proposed remedy would bring significant benefits to patients and would 
reverse the anticompetitive effects of the proposed acquisition.
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    \2\ The license to Barr provided by the order enables Barr to 
begin marketing the generic versions of Actiq at the earliest of 
final FDA approval of OVF or various specified dates. If Cephalon 
delays the introduction of OVF, the license allows Barr to market 
the generic products at specific dates that approximate the time 
that the parties' premerger documents predict OVF would have been 
launched.
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    Commissioner Thompson has dissented, arguing that the Commission 
should have sought a preliminary injunction to block this transaction 
on the grounds that there is a group of consumers who would purchase a 
branded BTCP product and would thus face higher prices. However, the 
evidence is not clear that this will happen. Even if it were to happen, 
this outcome would be a well-recognized result of the introduction of 
generic competition.\3\ In the past, the Commission has recognized and 
resolved the particular tradeoff that concerns Commissioner Thompson 
today. The Commission, including Commissioner Thompson, has recognized 
the net benefits that arise from the entry of generic pharmaceutical 
products and consequently has devoted substantial resources to identify 
and prohibit anticompetitive practices that have made the entry of 
generic drugs more difficult.\4\ As in our earlier cases, the

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benefits that earlier generic entry will bring to consumers of BTCP 
treatment in terms of lower average prices greatly exceed any price 
increases to the less price-sensitive patients who may continue to 
choose branded products.\5\ Contrary to Commissioner Thompson's claim, 
the underlying rationale for the relief mandated in this case is 
supported by unanimous Commission precedent.
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    \3\ In the face of generic entry, branded companies frequently 
raise the price for branded products that did not previously face 
such competition. See supra note 1.
    \4\ See, e.g., Schering-Plough Corp., Dkt. No. 9297, available 
at http://www.ftc.gov/os/adjpro/d9297/031218commissionopinion.pdf 
(agreement between branded and generic manufacturers to delay entry 
of generic); Biovail Corp., Dkt. No. C-4060 (consent order); 
available at http://www.ftc.gov/os/2002/04/biovailcomplaint.htm 
(wrongful Orange Book listing for Tiazac); Biovail Corp. and Elan 
Corp., Dkt. No. C-4057 (consent order), available at http://www.ftc.gov/os/2002/06/biovailelancmp.pdf (agreement among generic 
drug companies to divide market for generic Adalat CC); Abbott 
Labs., Dkt. No. C-3945 (consent order), complaint available at 
http://www.ftc.gov/os/2000/05/c3945complaint.htm; Geneva Pharm., 
Inc., Dkt. No. C-3946 (consent order), complaint available at http://www.ftc.gov/os/2000/05/c3946complaint.htm; Hoechst Marion Roussel, 
Inc., Dkt. No. 9293 (consent order), complaint available at http://www.ftc.gov/os/2000/03/hoechstandrxcomplaint.htm.
    \5\ In his dissent, Commissioner Thompson relies on a statement 
in the old case of United States v. Philadelphia National Bank, 374 
U.S. 321, 371 (1963), that anticompetitive mergers cannot be 
justified by some ``ultimate reckoning of social or economic debits 
and credits.'' We support this general principle. The issue here, 
however, is whether the transaction, as modified by the Order, can 
be considered anticompetitive in the first place when possible price 
increases are weighed against more likely and much larger price 
decreases to the same group of customers. In any merger case, 
predictions of procompetitive and anticompetitive effects are 
inherently uncertain, and--whether we choose to challenge or to 
pass--there often is a risk that one set of consumers will benefit 
and another set will lose. We are choosing between probabilities 
rather than sets of consumers.
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Dissenting Statement of Commissioner Mozelle W. Thompson

    The Commission today accepted, subject to public comment and final 
approval, a proposed settlement from Cephalon, Inc., and Cima Labs, 
Inc. This settlement is intended to remedy the likely anticompetitive 
effects of Cephalon's $515 million acquisition of Cima in the $200 
million market for drugs that treat terminally ill patients for 
sporadic breakthrough cancer pain (``BTCP''). I must dissent from the 
Commission's acceptance of the unprecedented proposed remedy because 
neither the merging parties nor the investigation have demonstrated 
that the remedy would substantially restore the lost competition 
between Cephalon and Cima.
    I strongly concur with the allegations in the Commission's 
complaint, which correctly alleges that Cephalon is a monopolist in the 
BTCP drug market. It also alleges that Cephalon unlawfully proposes to 
acquire Cima, the best-positioned potential competitor who would 
otherwise have likely entered the market within the next several 
years--well ahead of other potential entrants.
    ``Every order in a merger case has the same goal: to preserve fully 
the existing competition in the relevant market or markets.'' \1\ The 
proposed settlement in this case--which seeks to restore the lost 
branded competition from Cima by facilitating the entry of a generic 
product--fails because it cannot meet this goal. Accordingly, the 
Commission should have rejected the proposed settlement. Further, 
because the Cephalon/Cima merger in substance appears to be for the 
primary purpose of allowing Cephalon to gain control of Cima's new BTCP 
product,\2\ I believe that the Commission should have sought to block 
this merger in court.
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    \1\ Staff of the Bureau of Competition, ``Frequently Asked 
Questions About Merger Consent Order Provisions,'' (Answer to 
Question 1.), available at http://www.ftc.gov/bc/mergerfaq.htm.
    \2\ Cephalon outbid several alternative suitors, whose deals 
with Cima would not likely have raised antitrust concerns.
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    The Commission may challenge a proposed transaction that it 
believes will lessen competition, or it may take a settlement that 
restores the competition lost. Historically, the Commission has been 
extraordinarily successful in identifying and blocking proposed mergers 
that are likely anticompetitive. In a case such as this one, which 
involves a monopolist's acquiring the best-positioned potential 
entrant, I am confident that the Commission would be able to 
successfully block the proposed merger and preserve competition. 
Indeed, I found the evidence supporting the Commission's complaint 
against Cephalon and Cima particularly compelling and sufficient to 
demonstrate that the proposed combination would eliminate the expected 
future competition between the two companies. This elimination of 
future competition would allow Cephalon to keep BTCP drug prices at 
monopoly levels, which would harm cancer patients--a particularly 
vulnerable group of consumers. Litigation and a district court's entry 
of a ``full-stop'' injunction would have been warranted because of the 
unusual strength of this antitrust case.
    I recognize that in many Commission merger investigations, merging 
parties offer a settlement to avoid a Commission challenge to their 
proposed transaction. In such cases, ``the burden of coming forward 
with adequate restructure proposals should be on the sponsors of the 
merger.'' \3\ Furthermore, divestiture is typically employed where 
selling the assets used to manufacture and sell one company's competing 
product to a qualified new competitor can effectively replace the lost 
competition.\4\ Perhaps because divesting one of the merging companies' 
branded products is the most effective and efficient means of restoring 
lost competition, the Commission has never taken a settlement for a 
pharmaceutical merger that requires a respondent to take measures to 
facilitate generic entry where companies are marketing (or here, where 
one is marketing and the other likely soon will also be selling) 
branded products. I understand the argument that by requiring Cephalon 
to license generic entry, such entry is more certain and more quickly 
achieved, thus assuring that some customers would gain significant 
savings. However, while generic products and branded products are 
interchangeable to some extent, they are not necessarily considered 
reasonable substitutes by a significant segment of consumers in the 
typical pharmaceutical market. As a result, the Commission historically 
has been unwilling to trade away a branded product for a generic one in 
a Commission merger settlement.
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    \3\ Robert Pitofsky, ``The Nature and Limits of Restructuring in 
Merger Review,'' February 17, 2000, available at http://www.ftc.gov/speeches/pitofsky/restruct.htm.
    \4\ Staff of the Bureau of Competition, ``Statement of the 
Federal Trade Commission's Bureau of Competition on Negotiating 
Merger Remedies,'' (In discussion under ``The Assets to Be 
Divested''), available at http://www.ftc.gov/bc/bestpractices/bestpractices030401.htm.
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    I acknowledge the argument in this case that some end-stage cancer 
patients who buy BTCP drug products may be more price sensitive than 
customers in typical pharmaceutical markets because they do not have 
sufficient insurance coverage. But the investigation failed to develop 
any empirical or other compelling evidence substantiating that this 
particular market has such exceptional characteristics that a generic 
product could serve as a substitute for a branded product. Without such 
compelling evidence, the Commission should not accept a proposed 
settlement because ``(t)he risk of inadequate relief * * * should not 
be borne by consumers.'' \5\ The parties likewise failed to present 
evidence that shows that facilitating generic entry in the BTCP drug 
market will substantially replace the competition lost between Cephalon 
and Cima. By contrast, I found it particularly troubling that based on 
a range of economically reasonable assumptions about this 
pharmaceutical market, the Commission could have concluded just as 
easily that less price-sensitive patients could well suffer price 
increases that may possibly amount to tens of millions of dollars,

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notwithstanding the licensing of generic entry following the merger.
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    \5\ Richard G. Parker and David A. Balto, ``The Evolving 
Approach to Merger Remedies,'' at 2, available at http://www.ftc.gov/speeches/other/remedies.htm.
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    The majority statement cites other Commission challenges to 
restraints as support for picking which consumers will win and which 
will lose in pharmaceutical markets. However, these challenged 
restraints were intended to, and did, hinder generic entry, and the 
thrust in our remedies in these cases is to allow free competition to 
work. A subtle but important policy perspective is that the free market 
picked the winners and losers; we only allowed the market to work. The 
Commission did not manipulate the outcome of these markets.
    In reading the majority's statement, I observe though that the 
majority unfortunately compares market outcomes in its statement 
instead of evaluating the Commission's appropriate role in providing 
antitrust protection in American markets. Our Clayton Act, Section 7 
mandate is simple: protect markets so that the competitive process 
provides the market outcomes, such as quantity produced, prices 
charged, and who wins and loses financially. I disagree with a merger 
remedy policy that instead embraces manipulating the structure of 
market competition and trades off recognized (or probable) benefits for 
one segment of consumers for recognized (or probable) harm to another. 
As the Supreme Court over 40 years ago established, antitrust policy 
does not countenance mergers that are anticompetitive but are, ``on 
some ultimate reckoning of social or economic debits and credits, * * * 
deemed beneficial.'' \6\ This policy principle equally--if not even 
more so--applies to government-imposed restructurings in merger 
remedies. Accordingly, I believe that the Commission should refrain 
from accepting settlements that expressly contemplate benefitting one 
group of customers at the expense of other customers, especially where 
challenging a merger would likely be successful and the Commission is 
able to fulfill its mandate to protect all consumers from antitrust 
harm. For all of these reasons, I believe that the Commission should 
have rejected the proposed settlement and challenged this transaction.
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    \6\ Setting out the bounds of Section 7 enforcement, the Court 
further cautions decision makers: ``A value choice of such magnitude 
is beyond the ordinary limits of judicial competence, and in any 
event has been made for us already, by Congress when it enacted the 
amended Sec.  7.'' United States v. Philadelphia National Bank, 83 
S.Ct. 1715, 1745 (1963). The majority statement strains in a failed 
attempt to distinguish away this Supreme Court case. Regardless of 
whether customers are within different geographic markets or within 
different segments of a relevant product market, a reasonable 
reading of the case is that the Supreme Court does not condone the 
type of consumer welfare tradeoffs that the majority statement 
endorses.
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    As a final note, I recognize that the pharmaceutical industry over 
the recent past has transformed itself to an industry where larger, 
established companies refrain from developing the bulk of their 
products internally and instead often acquire smaller R&D companies as 
a means of stocking their portfolio of products. This transaction 
provides the Commission with the opportunity to demonstrate its 
commitment to aggressively protect pharmaceutical consumers under these 
changed market dynamics. Instead, I fear that the Commission today may 
be signaling the industry that dominant firms in pharmaceutical markets 
now have the antitrust ``green light'' to acquire competitors or 
potential entrants in exchange for a remedy that restructures markets 
in ways that trumps the free market decision as to who will benefit 
from the market and who will be harmed, as well as the extent of these 
effects on different groups. Accordingly, I believe that the Commission 
should have rejected the proposed settlement and challenged the 
transaction in order to protect fully consumers in the BTCP drug market 
and to signal the Commission's antitrust resolve in both challenging 
anticompetitive mergers and only accepting remedies that minimize 
consumer exposure to anticompetitive risk.

[FR Doc. 04-19443 Filed 8-24-04; 8:45 am]
BILLING CODE 6750-01-P