[Federal Register Volume 72, Number 195 (Wednesday, October 10, 2007)]
[Notices]
[Pages 57579-57581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-19892]


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FEDERAL TRADE COMMISSION

[File No. 071 0164]


Mylan Laboratories and E. Merck oHG; Analysis of Agreement 
Containing Consent Orders 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 October 27, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Mylan/Merck, File No. 071 0164,'' 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 email messages directed to the 
following e-mail box: [email protected]. 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 commentson the FTC Web 
site. More information, including routine uses permitted by the Privacy 
Act, may be found in the FTC's privacy policy, athttp://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Kari A. Wallace (202) 326-3085, Bureau 
of Competition, Room NJ-5108, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580.
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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).

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 September 27, 2007), on the World Wide Web, at http://www.ftc.gov/os/2007/09/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.

Analysis of Agreement Containing 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 Mylan Laboratories (``Mylan'') and E. Merck oHG 
(``Merck'') which is designed to remedy the anticompetitive effects of 
the acquisition of certain assets of Merck by Mylan. Under the terms of 
the proposed Consent Agreement, the companies would be required to 
assign and divest the Merck rights and assets necessary to manufacture 
and market generic: (1) Acebutolol hydrochloride capsules; (2) 
flecainide acetate tablets; (3) guanfacine hydrochloride tablets; (4) 
nicardipine hydrochloride capsules; and (5) sotalol hydrochloride AF 
tablets to Amneal Pharmaceuticals LLC (``Amneal'').
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) 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, modify 
it, or make final the Decision and Order (``Order'').
    Pursuant to an Agreement and Plan of Merger executed on May 12 and 
13, 2007, Mylan proposes to acquire Merck's generic subsidiary (``Merck 
Generics'') and all subsidiaries held directly or indirectly by Merck 
Generics, by acquiring 100 percent of the issued shares of those 
subsidies for approximately $6.6 billion. 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. Sec.  18, and 
section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
Sec.  45, by lessening competition in the U.S. markets for the 
manufacture and sale of the following generic pharmaceutical products: 
(1) Acebutolol hydrochloride capsules; (2) flecainide acetate tablets; 
(3) guanfacine hydrochloride tablets; (4) nicardipine hydrochloride 
capsules; and (5) sotalol hydrochloride AF tablets (the ``Products''). 
The proposed Consent Agreement will remedy the alleged violations by 
replacing the lost competition that would result from the acquisition 
in each of these markets.
    Mylan is a leading developer, manufacturer, marketer, and 
distributor of generic pharmaceutical drugs. Headquartered in 
Pennsylvania, Mylan

[[Page 57580]]

sells generic pharmaceuticals in the United States and has 
manufacturing facilities throughout the country. Merck is a German 
pharmaceutical company that develops and manufactures pharmaceutical 
products for sale in the United States. Merck sells generic 
pharmaceutical products directly to customers in the United States 
through its subsidiary Genpharm L.P., as well as indirectly through 
distribution agreements with other generic companies, including Par 
Pharmaceutical Companies, Inc. (``Par'').

The Products and Structure of the Markets

    The proposed acquisition of certain assets of Merck by Mylan would 
strengthen Mylan's worldwide position in generic pharmaceuticals and 
provide Mylan with a stronger pipeline of generic products. The 
companies overlap in a number of generic pharmaceutical markets, and if 
consummated, the transaction likely would lead to anticompetitive 
effects in five of these markets.
    The transaction would reduce the number of competing generic 
suppliers in the overlap markets. 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 multiple generic equivalents for each of the products at 
issue here, the branded versions no longer significantly constrain the 
generics' pricing.
    In the market for generic acebutolol capsules, Mylan and Merck are 
the only companies manufacturing and selling products in the United 
States. For the four other generic products, Mylan and Merck currently 
are two of a small number of suppliers offering the product. In each of 
these markets, there are a limited number of competitors.
    Generic acebutolol hydrochloride is a beta blocker used to treat 
hypertension. Mylan and Merck/Par are the only suppliers of generic 
acebutolol capsules in the United States, with respective market shares 
of approximately 59 and 41 percent. Therefore, the proposed transaction 
would give Mylan a monopoly in this market.
    Generic flecainide acetate is an anti-arrhythmia drug used to treat 
heart problems. Flecainide is produced and sold by five companies in 
the United States: Mylan, Merck/Par, Roxane Laboratories Inc. 
(``Roxane''), Barr Pharmaceuticals Inc., and Ranbaxy Pharmaceuticals 
Inc. Mylan is the market leader with nearly 57 percent share, followed 
by Merck/Par with 21 percent, and Roxane with 19 percent. After Mylan's 
acquisition of Merck Generics, Mylan's market share would increase to 
approximately 78 percent and the number of suppliers of generic 
flecainide would decrease from five to four.
    Guanfacine hydrochloride, the generic version of the branded drug 
Tenex, is an alpha blocker used to treat hypertension that comes in 
both 1 mg and 2 mg strengths. Mylan is the market leader with nearly 53 
percent share. Watson Pharmaceuticals Inc. (``Watson''), Merck/Par, 
Actavis Group hf. (``Actavis''), Major Pharmaceuticals Inc. and 
Qualitest Pharmaceuticals Inc. also manufacture and sell generic 
guanfacine tablets in the United States, although not all six suppliers 
are capable of supplying all formulations. For instance, Mylan, Merck/
Par, Watson and Actavis, are the only suppliers of the 2 mg formulation 
of guanfacine. Because many customers prefer to purchase the 1 mg and 2 
mg formulations of the product from one supplier, the competitive 
significance of the other four suppliers who do not sell these 
formulations is limited.
    Nicardipine hydrochloride is a calcium channel blocker used to 
treat hypertension. Mylan, Merck, and Teva Pharmaceutical Industries 
Ltd. (``Teva'') are the only manufacturers of generic nicardipine 
capsules in the United States, with respective market shares of 54 
percent, 32 percent and 14 percent. The proposed transaction would thus 
result in an increase in Mylan's market share to approximately 86 
percent and reduce the number of suppliers from three to two.
    Generic sotalol AF is a beta blocker used to treat hypertension. 
The market for sotalol AF is led by Apotex Inc. (``Apotex''). Merck and 
Mylan are the only other significant competitors to Apotex in the 
generic sotalol AF tablet market. Merck launched its sotalol AF product 
in late 2006, followed by Mylan in the spring of 2007. Therefore, the 
proposed transaction would reduce the number of suppliers from three to 
two.

Entry

    Entry into the markets for the manufacture and sale of the Products 
would not be timely, likely or sufficient in its magnitude, character, 
and scope to deter or counteract the anticompetitive effects of the 
acquisition. Entry would not take place in a timely manner because the 
combination of generic drug development times and FDA drug approval 
requirements takes at least two years. Entry would not be likely 
because the relevant markets are relatively small and in decline, so 
the limited sales opportunities available to a new entrant are likely 
insufficient to warrant the time and investment necessary to enter.

Effects

    The proposed acquisition would cause significant anticompetitive 
harm to consumers in the U.S. markets for the manufacture and sale of 
generic acebutolol hydrochloride capsules, flecainide acetate tablets, 
guanfacine hydrochloride tablets, nicardipine hydrochloride capsules, 
and sotalol hydrochloride AF tablets. In generic pharmaceutical 
markets, pricing is heavily influenced by the number of competitors 
that participate in a given market. Here, the evidence shows that, 
given the small number of suppliers, the prices of the generic 
pharmaceutical products at issue decrease with the entry of each 
additional competitor. Evidence gathered during our investigation 
indicates that anticompetitive effects--whether unilateral or 
coordinated--are likely to result from the proposed transaction due to 
a decrease in the number of independent competitors in the markets at 
issue.
    The acquisition of Merck by Mylan would create a monopoly in the 
market for generic acebutolol hydrochloride tablets. The evidence 
indicates that the presence of more than one competitor allows 
customers to negotiate lower prices and that the reduction in the 
number of competitors in this market would allow the merged entity to 
unilaterally exercise market power with a resulting increase in prices. 
In the markets for generic flecainide acetate tablets, generic 
nicardipine hydrochloride capsules, and generic sotalol AF tablets, the 
proposed acquisition would leave only two significant current 
competitors: the combined firm and one other company. The evidence 
indicates that the presence of three or more independent competitors in 
these markets allows customers to negotiate lower prices, and that a 
reduction in the number of competitors in these markets would allow the 
merged entity and other market participants to raise prices. Likewise, 
in the generic guanfacine hydrochloride tablet market, the reduction in 
the number of competitors also would likely lead to higher prices.
    The competitive concerns can be characterized as both unilateral 
and coordinated in nature. The homogenous nature of the products 
involved, the minimal incentives to deviate, and the relatively 
predictable prospects of gaining new business all indicate that the 
firms in the market will find it profitable to coordinate their 
pricing. The impact that a reduction in the

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number of firms would have on pricing can also be explained in terms of 
unilateral effects, as the likelihood that the merging parties would be 
the first and second choices in a significant number of bidding 
situations is enhanced where the number of firms participating in the 
market decreases substantially.

The Consent Agreement

    The proposed Consent Agreement effectively remedies the proposed 
acquisition's anticompetitive effects in the relevant product markets. 
Pursuant to the Consent Agreement, Mylan and Merck are required to 
divest certain rights and assets related to the Products to a 
Commission-approved acquirer no later than ten (10) days after the 
acquisition. Specifically, the proposed Consent Agreement requires that 
Merck divest its assets in the Products to Amneal.
    The acquirer of the divested assets must receive the prior approval 
of the Commission. The Commission's goal in evaluating a possible 
purchaser of divested assets is to maintain the competitive environment 
that existed prior to the acquisition. A proposed acquirer of divested 
assets must not itself present competitive problems.
    Amneal, a small but growing generic manufacturer, is particularly 
well-positioned to manufacture and market its acquired products and 
compete effectively in those markets. Amneal develops, manufacturers, 
sells, and distributes generic pharmaceuticals within the United 
States. Moreover, Amneal will not present competitive problems in any 
of the markets in which it will acquire a divested asset because it 
currently does not compete in those markets. With its resources, 
capabilities, good reputation, and experience marketing generic 
products, Amneal is well-positioned to replicate the competition that 
would be lost with the proposed acquisition.
    If the Commission determines that Amneal is not an acceptable 
acquirer of the assets to be divested, or that the manner of the 
divestitures to Amneal is not acceptable, the parties must unwind the 
sale and divest the assets within six (6) months of the date the Order 
becomes final to another Commission-approved acquirer. If the parties 
fail to divest within six (6) months, the Commission may appoint a 
trustee to divest the Products.
    The proposed remedy contains several provisions to ensure that the 
divestitures are successful. The Order requires Mylan and Merck to 
provide transitional services to enable the Commission-approved 
acquirer to obtain all of the necessary approvals from the FDA. These 
transitional services include technology transfer assistance to 
manufacture the Products in substantially the same manner and quality 
employed or achieved by Merck.
    The Commission has appointed R. Owen Richards of Quantic Regulatory 
Services, LLC (``Quantic'') to oversee the asset transfer and to ensure 
Mylan and Merck's compliance with all of the provisions of the proposed 
Consent Agreement. Mr. Richards is President of Quantic and has several 
years of experience in the pharmaceutical industry. He is a highly-
qualified expert on FDA regulatory matters and currently advises 
Quantic clients on achieving satisfactory regulatory compliance and 
interfacing with the FDA. 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 Mylan and 
Merck 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 Order or to modify its terms in 
any way.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E7-19892 Filed 10-9-07: 8:45 am]
[BILLING CODE 6750-01-S]