[Federal Register Volume 71, Number 206 (Wednesday, October 25, 2006)]
[Notices]
[Pages 62467-62469]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-17904]


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FEDERAL TRADE COMMISSION

[File No. 061 0217]


Barr Pharmaceuticals, Inc. and Pliva d.d.; Analysis of Proposed 
Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before November 20, 2006.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Barr Pharmaceuticals, File No. 061 0217,'' 
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 135-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\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 
that do not contain any nonpublic information may instead be filed in 
electronic form as part of or as an attachment to e-mail messages 
directed to the following e-mail box: [email protected].
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See 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 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.

FOR FURTHER INFORMATION CONTACT: Stephanie C. Bovee, Bureau of 
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-2083.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for October 20, 2006), on the World Wide Web, at http://www.ftc.gov/os/2006/10/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. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

[[Page 62468]]

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Barr Pharmaceuticals, Inc. (``Barr''), which is 
designed to remedy the anticompetitive effects of its proposed 
acquisition of Pliva d.d. (``Pliva''). Under the terms of the Consent 
Agreement, Barr is required to divest to Apotex, Inc. (``Apotex'') 
Barr's generic trazodone and generic triamterene with 
hydrochlorothiazide (``triamterene/HCTZ'') businesses. Further, the 
Consent Agreement requires Barr to return marketing rights to Pliva's 
generic nimodipine product in development to its joint venture partner, 
Banner Pharmacaps, Inc. (``Banner''), or in the alternative, that Barr 
return marketing rights to its nimodipine product in development to its 
development partner, Cardinal Health, Inc. (``Cardinal''). Lastly, the 
Consent Agreement requires Barr to divest Pliva's branded organ 
preservation solution, Custodiol, to New Custodiol LLC, a company 
formed for the purpose of marketing and selling Custodiol. The assets 
for each of the divestitures includes all of the relevant intellectual 
property, customer lists, research and development information, and 
regulatory materials. With these divestitures the competition that 
would otherwise be eliminated through the proposed acquisition of Pliva 
by Barr will be fully preserved.
    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 proposedConsent 
Agreement and the comments received, and will decide whether it should 
withdraw from the proposed Consent Agreement, modify it, or make final 
the Decision and Order (``Order'').
    Pursuant to an announcement dated June 27, 2006, Barr intends to 
acquire all of the outstanding shares of Pliva by cash tender offer for 
approximately $2.5 billion. Both parties manufacture and sell generic 
pharmaceuticals in the United States. The Commission's Complaint 
alleges that the proposed acquisition, if consummated, would violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 
of the FTC Act, as amended, 15 U.S.C. 45, in the markets for the 
manufacture and sale of: (1) Generic trazodone hydrochloride tablets; 
(2) generic triamterene/HCTZ tablets; (3) generic nimodipine soft-gel 
capsules; and (4) organ preservation solutions. The proposed Consent 
Agreement remedies the alleged violations by replacing in each of these 
markets the lost competition that would result from the acquisition.

II. The Products and Structure of the Markets

    Barr's acquisition of Pliva would reduce the number of current or 
future competing generic suppliers in the following three 
pharmaceutical products: trazodone hydrochloride tablets, triamterene/
HCTZ tablets and nimodipine soft-gel capsules. The number of generic 
suppliers has a direct and substantial effect on generic pricing, as 
each additional generic supplier can have a competitive impact on the 
market. Because there are (or will be) multiple generic equivalents for 
the three products at issue here, the branded versions do not (or will 
not) significantly constrain the generics' pricing.
    For each of the three generic products at issue here, Barr and 
Pliva currently are two of a small number of suppliers offering the 
product or are the only two future competitors.
    Trazodone hydrochloride is an antidepressant. The branded product, 
Desyrel, is manufactured and sold by Apothecon, Inc., and typically 
sells for 50 times the generic price. Thus, Desyrel does not have a 
significant effect on pricing for generic trazodone. Sales of generic 
trazodone were over $53 million in 2005. Currently, Barr, Pliva, Watson 
Pharmaceuticals, Inc. (``Watson''), Teva Pharmaceutical Industries Ltd. 
(``Teva''), and United Research Laboratories/Mutual Pharmaceutical 
Company (``URL/Mutual'') are the only active suppliers of generic 
trazodone in the United States, although not all five suppliers are 
capable of supplying all formulations. For instance, Barr and Pliva are 
two of only three suppliers of the 150 mg formulation. Because many 
customers prefer to purchase the 50 mg, 100 mg and 150 mg formulations 
of generic trazodone from one supplier, the competitive significance of 
the other two suppliers who do not sell these formulations is limited. 
Moreover, the acquisition would reduce the number of suppliers of 
generic trazodone from five to four, and significantly increase Barr's 
market share to over 64 percent in all formulations.
    Triamterene/HCTZ is a combination product used to treat high blood 
pressure. The branded traimterene/HCTZ product, Maxzide, is 
manufactured and sold by Mylan Laboratories, Inc. (``Mylan'') and is 
priced more than five times higher than its generic equivalent. Maxzide 
does not have a significant effect on the pricing of generic 
triamterene/HCTZ, while the competition between generic producers has a 
direct and substantial effect on generic triamterene/HCTZ pricing. 
Currently, Barr, Pliva, Watson, Mylan and Sandoz, Inc. (``Sandoz'') are 
the only active suppliers of various formulations of generic 
triamterene/HCTZ tablets in the United States. Furthermore, there is 
evidence that several of these suppliers may have a more limited 
competitive significance in the market than Barr and Pliva. The 
proposed acquisition would reduce the number of suppliers from five to 
four, and would increase Barr's market share to about 35 percent.
    Nimodipine is used to treat symptoms resulting from a ruptured 
blood vessel in the brain. The branded version of this product, 
Nimotop, is manufactured and sold by Bayer. Although the patent for the 
branded version of the drug has already expired, there are no generic 
suppliers of nimodipine on the market. Barr, in conjunction with 
Cardinal, plans to introduce generic nimodipine in the fall of 2006. 
Pliva also has plans to introduce generic nimodipine with its partner, 
Banner in the same time frame. Pliva and Barr are the only firms in the 
process of entering this market. The acquisition would, therefore, 
eliminate future competition between Barr and Pliva and result in a 
monopoly in the generic nimodipine market.
    Barr's acquisition of Pliva would also have an impact in one 
additional market, organ preservation solutions. These solutions are 
used during the harvesting of donor organs to flush and preserve the 
viability of the donor organ prior to transplantation. The market for 
organ preservation solutions in the United States is highly 
concentrated. Barr and Pliva have market shares of approximately 60 and 
30 percent, respectively, in this $17 million market. The rest of the 
market is divided among several smaller, niche players. The acquisition 
would significantly increase concentration in this market with Barr 
achieving near monopoly share with approximately 90 percent of the 
organ preservation solution market.

III. Entry

    Entry into manufacture and sale of generic trazodone, generic 
triamterene/HCTZ, generic nimodipine, and organ preservation solutions 
would not be timely, likely, or sufficient in its magnitude, character, 
and scope to deter

[[Page 62469]]

or counteract the anticompetitive effects of the acquisition. 
Developing and obtaining FDA approval for the manufacture and sale of 
each of the relevant products takes at least 2 years due to substantial 
regulatory, technological, and intellectual property barriers. In 
addition to regulatory barriers, penetrating the organ preservation 
solution market is further hindered by the reluctance of transplant 
surgeons to switch to a new organ preservation product.

IV. Effects of the Acquisition

    The proposed acquisition would cause significant competitive harm 
to consumers in the U.S. markets for generic trazodone, generic 
triamterene/HCTZ, and organ preservation solutions by eliminating 
actual, direct, and substantial competition between Barr and Pliva, by 
increasing the likelihood that Barr will be able to unilaterally 
exercise market power, by increasing the likelihood and degree of 
coordinated interaction between the few remaining competitors, and by 
increasing the likelihood that consumers will pay higher prices. In 
these markets, the evidence shows that consumers have obtained lower 
prices due to the competitive rivalry that exists between market 
participants. The evidence also shows that as new rivals have entered 
the markets, consumers have obtained lower prices. The acquisition 
would also cause significant competitive harm to consumers in the U.S. 
market for generic nimodipine by eliminating future competition between 
Barr and Pliva.

V. The Consent Agreement

    The proposed Consent Agreement preserves competition in the generic 
trazodone and triamterene/HCTZ markets by requiring that Barr divest 
all of the Barr assets for these two products to Apotex within 10 days 
after the acquisition. The proposed Consent Agreement contains several 
provisions designed to ensure these divestitures are successful. Barr 
must provide various transitional services to enable Apotex to compete 
against Barr immediately following the divestiture. These services 
include providing Apotex with existing inventory of generic trazodone 
and triamterene/HCTZ, supplying Apotex with generic trazodone and 
triamterene/HCTZ until Apotex secures FDA approval to manufacture the 
products for itself in its own facility, and providing Apotex with all 
technical assistance necessary to obtain any FDA approvals. Apotex is a 
reputable generic manufacturer and is well-positioned to manufacture 
and market the acquired products and to compete effectively in those 
markets. In the United States, Apotex is roughly the tenth-largest 
generic pharmaceutical company with over 50 products. Moreover, the 
acquisition by Apotex does not present competitive problems in either 
the generic trazodone market or the generic triamterene/HCTZ market 
because it does not currently compete in those markets.
    The proposed Consent Agreement preserves the actual and potential 
competition in the generic nimodipine market by requiring Barr to 
divest the Pliva nimodipine assets to Banner no later than 10 days 
after the acquisition, or to divest its own nimodipine assets to 
Cardinal no later than 60 days after the acquisition. Banner and 
Cardinal are both reputable soft-gel capsule manufacturers and 
particularly well-positioned to manufacture and market generic 
nimodipine because they are already manufacturing generic nimodipine 
soft-gel capsules pursuant to their respective joint ventures with 
Pliva and Barr.
    The proposed Consent Agreement preserves the competition in the 
organ preservation solution market by requiring Barr to divest the 
Pliva organ preservation solution business to New Custodiol LLC no 
later than 10 days after the acquisition. The Custodiol product is 
currently manufactured by a third party, Dr. Franz Kohler Chemie GmbH, 
who will continue to supply the product to new New Custodiol LLC. New 
Custodiol LLC is a company that was formed by Pliva's current head of 
marketing for organ preservation solutions, Mr. Allen Weber, for the 
purpose of acquiring, marketing and selling Custodiol in the United 
States. New Custodiol LLC has obtained funding from venture capitalists 
sufficient to allow it to manufacture and sell Custodiol effectively. 
The combination of Mr. Allen Weber's industry experience and venture 
capital backing makes New Custodiol LLC well positioned to acquire 
Custodiol and to restore the competition that would be lost if the 
proposed acquisition were to proceed unremedied. If the sale of Pliva's 
Custodiol is not successful, the Consent Agreement requires that Barr 
divest its organ preservation solution, ViaSpan, to a Commission-
approved acquirer.
    If the Commission determines that any of the divestitures or 
divestees are not acceptable, Barr must rescind the transaction(s) and 
divest the assets to Commission-approved buyer(s) not later than 6 
months from the date the Order becomes final. If Barr fails to divest 
within the 6 months, the Commission may appoint a trustee to divest the 
assets.
    The proposed remedy also allows for the appointment of an Interim 
Trustee, experienced in obtaining regulatory approval and the 
manufacture of pharmaceuticals, to oversee the technology transfer and 
to assist the divestees in the event of difficulties. As part of the 
proposed remedy, Barr is required to execute an agreement conferring 
all rights and powers necessary for the Interim Trustee to satisfy his 
responsibilities under the Order to assure successful divestitures. The 
Commission has appointed Mr. William Rahe to be the Interim Monitor and 
the divestees have consented to his selection. The monitor will ensure 
that the Commission remains informed about the status of the proposed 
divestitures and asset transfers.
    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. E6-17904 Filed 10-24-06; 8:45 am]
BILLING CODE 6750-01-P