[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Notices]
[Pages 79486-79489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30831]


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FEDERAL TRADE COMMISSION

[File No. 081 0224]


Teva Pharmaceutical Industries Ltd. and Barr Pharmaceuticals, 
Inc; 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 January 19, 2008

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Teva-Barr, File No. 081 0224,'' 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, N.W., Washington, D.C. 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 by following the instructions on the web-based form at (http://secure.commentworks.com/ftc-TevaBarr). To ensure that the Commission 
considers an electronic comment, you must file it on that web-based 
form.
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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 website, to the extent 
practicable, at 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 website. 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.shtm).

FOR FURTHER INFORMATION CONTACT: Stephanie C. Bovee, FTC Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 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 December 19, 2008), on the World Wide Web, at (http://www.ftc.gov/os/2008/12/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, 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. 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 Teva Pharmaceutical Industries Ltd. (``Teva'') and 
Barr Pharmaceuticals Inc. (``Barr'') that is designed to remedy the 
anticompetitive effects of the acquisition of Barr by Teva. Under the 
terms of the proposed Consent Agreement, the companies would be 
required to assign and divest to Watson Pharmaceuticals (``Watson'') 
Teva's rights and assets necessary to manufacture and market generic: 
(1) chlorzoxazone tablets; (2) deferoxamine injection; (3) fluoxetine 
weekly capsules; (4) carboplatin injection; and (5) metronidazole 
tablets. The Consent Agreement also requires the companies to assign 
and divest to Watson all of Barr's rights and assets necessary to 
manufacture and market generic: (1) metoclopramide hydrochloride 
(``HCl'') tablets; (2) cyclosporine liquid; (3) cyclosporine capsules; 
(4) desmopressin acetate tablets; (5) epoprostenol sodium (freeze-dried 
powder) injection (``epop''); (6) flutamide capsules; (7) glipizide/
metformin HCl tablets; (8) mirtazapine orally disintegrating tablets 
(``ODT''); (9) tamoxifen citrate tablets; and (10) tetracycline HCl 
capsules. In addition, the proposed Consent Agreement requires the 
companies to divest Teva's rights and assets necessary to manufacture 
and market generic trazodone HCl tablets and thirteen oral 
contraceptive products to Qualitest Pharmaceuticals (``Qualitest'').
    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, modify it, or make 
final the Decision and Order (``Order'').
    Pursuant to an Agreement and Plan of Merger dated July 18, 2008, 
Teva proposes to acquire all of the issued and outstanding shares of 
Barr for approximately $7.4 billion, plus the assumption of $1.5 
billion of net debt, for approximately $8.9 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

[[Page 79487]]

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) tetracycline HCl capsules; (2) chlorzoxazone tablets; (3) 
desmopressin acetate tablets; (4) metoclopramide HCl tablets; (5) 
carboplatin injection; (6) tamoxifen citrate tablets; (7) metronidazole 
tablets; (8) trazodone HCl tablets; (9) glipizide/metformin HCl 
tablets; (10) cyclosporine liquid; (11) cyclosporine capsules; (12) 
flutamide capsules; (13) mirtazapine ODT; (14) deferoxamine injection; 
(15) epop; (16) weekly fluoxetine capsules; and (17) thirteen generic 
oral contraceptive markets (collectively, 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 the markets.

The Products and Structure of the Markets

    The proposed acquisition of Barr by Teva would strengthen Teva's 
worldwide position in generic pharmaceuticals and provide Teva with a 
stronger pipeline of generic products.
    The transaction would reduce the number of competing generic 
suppliers in each of the relevant 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. Generic pharmaceutical customers are not likely to switch to 
the equivalent branded product because they are priced significantly 
higher than the generic products. After more than one generic product 
is introduced, competition among the generic competitors drives 
pricing, and the branded product's pricing largely becomes 
competitively irrelevant.
    In the markets for generic tetracycline HCl tablets, chlorzoxazone 
tablets, and desmopressin acetate tablets, Teva and Barr are the only 
companies manufacturing and selling products in the United States. 
Tetracycline HCl is an old, broad-spectrum antibiotic used now 
primarily for the treatment of acne and rosacea. Chlorzoxazone is a 
centrally acting muscle relaxant used to treat muscle spasms. 
Desmopressin acetate is a synthetic replacement for an antidiuretic 
hormone that reduces urine production during sleep and is used to treat 
bed-wetting in children. Because Teva and Barr are the only suppliers 
of these generic products in the United States, the proposed 
acquisition creates a monopoly in each of these markets.
    In the generic tamoxifen citrate and cyclosporine liquid markets, 
the proposed acquisition reduces the number of competitors from three 
to two. Tamoxifen citrate is a selective estrogen receptor modulator 
that is used in the treatment of breast cancer. Cyclosporine is an 
immunosuppressant drug used to prevent the rejection of transplanted 
organs. Combined, Teva and Barr, currently account for 73 percent of 
the generic tamoxifen citrate market and 55 percent of the generic 
cyclosporine liquid market.
    Teva's proposed acquisition of Barr would reduce the number of 
competitors from four to three in the following generic markets: (1) 
metoclopramide HCl tablets; (2) carboplatin injection; (3) 
metronidazole tablets; (4) trazodone HCl tablets; (5) cyclosporine 
capsules; (6) flutamide capsules; (7) glipizide/metformin HCl tablets; 
(8) deferoxamine injection; and (9) mirtazapine ODT. The structure of 
each of these markets is as follows:
 Metoclopramide HCl is a dopamine receptor antagonist used to 
treat nausea and vomiting as well as gastroesophageal reflux disease 
(``GERD''). In the generic metoclopramide HCl market, Teva and Barr are 
two of only four suppliers supplying all dosage forms of metoclopramide 
HCl. Qualitest and Mutual/URL Pharmaceuticals (``Mutual'') are the 
remaining two suppliers. A combined Teva and Barr would possess 82 
percent of the overall generic metoclopramide HCl market based on 
current sales.
 Carboplatin, the generic version of Bristol-Myers Squibb 
Company's (``BMS'') Paraplatin[reg], is a chemotherapy drug used to 
treat a variety of cancers, mainly ovarian, lung, head and neck 
cancers. Teva and Barr are two of the leading suppliers of generic 
carboplatin injection with a combined market share of 60 percent. APP 
Pharmaceuticals and Bedford Laboratories (``Bedford'') are the two 
remaining suppliers in the generic carboplatin injection market with 11 
percent and 29 percent of the market, respectively.
 Metronidazole is an anti-infective used in the treatment of a 
variety of bacterial infections. Barr is the market leader in the 
generic metronidazole market with 50 percent market share. Teva is 
close behind with 39 percent of the market. Mutual and Amneal 
Pharmaceuticals are the only other suppliers with 4 percent and 1 
percent of the market, respectively. Therefore, the proposed 
acquisition combines two of the most competitively significant 
suppliers of generic metronidazole, resulting in a combined market 
share of 89 percent.
 Trazodone is an antidepressant with a sedative effect. In the 
generic trazodone market, the proposed acquisition would result in a 
combined market share of 75 percent. Apotex Group is the only other 
competitively significant supplier with 22 percent of the market. The 
fourth supplier--Watson--has had limited success in this market, having 
captured only a 3 percent market share to date.
 Cyclosporine is an immunosuppressant drug used to prevent the 
rejection of transplanted organs. In the generic cyclosprine capsules 
market, Teva and Barr have roughly equal market shares and their post-
acquisition market share would be 41 percent. Abbott Laboratories is 
the market leader with 51 percent of the market. The fourth supplier--
Sandoz Inc. (``Sandoz'')-- represents approximately 8 percent of the 
market.
 Flutamide is an anti-androgen drug used to treat prostate 
cancer. Teva, Barr, Par Pharmaceutical Companies (``Par''), and Sandoz 
are the four suppliers of generic flutamide. Sandoz is the market 
leader with 34 percent of the market. Teva has 28 percent of the 
market, Par has 24 percent, and Barr has 14 percent. Consequently, the 
proposed acquisition would result in a combined market share of 42 
percent.
 Glipizide/Metformin, the generic version of BMS's 
Metaglip[reg], is commonly prescribed as a first line treatment for 
diabetes. Mylan Pharmaceuticals (``Mylan''), Sandoz, Teva, and Barr are 
the four suppliers of generic glipizide/metformin. Sandoz is the market 
leader with 37 percent. Barr and Teva have roughly equal market shares 
of 25 and 26 percent, respectively. The fourth supplier--Mylan--has the 
smallest market share with 12 percent. Thus, Teva's proposed 
acquisition of Barr would result in a post acquisition market share of 
51 percent.
 Deferoxamine, the generic version of Novartis International 
AG's Desferal[reg], is a chelating agent used to remove excess iron 
from the body. In the generic deferoxamine market, a combined Teva and 
Barr would possess 16 percent of the market. Hospira Inc. is the market 
leader with 73 percent market share. The remaining supplier--Bedford--
is a small competitor as reflected by its 11 percent share of the 
market. Although the combined share of Teva and Barr is only 16 
percent, the proposed

[[Page 79488]]

transaction would combine two of only four companies offering generic 
deferoxamine injection in the United States. As discussed in Effects, 
below, the number of suppliers is the driving factor for prices in 
generic markets.
 Mirtazapine is an antidepressant used to treat moderate to 
severe depression. Only four companies currently supply generic 
mirtazapine in the United States--Teva, Barr, Prasco Laboratories 
(``Prasco''), and Aurobindo Pharma (``Aurobindo''). Prasco is the 
market leader with a 49 percent market share. Barr has 26 percent of 
the market, and Teva has 10 percent of the market. Aurobindo is the 
smallest competitor with only 8 percent of the market. Hence, the 
proposed acquisition would result in a combined market share of 36 
percent.
    In two product markets--epop and fluoxetine weekly capsules--the 
proposed acquisition would eliminate important and significant future 
competition. Epop is used to treat severe primary pulmonary 
hypertension. Epop is a new generic market and Teva is currently the 
only generic epop supplier. Barr has an epop product in development. 
Fluoxetine weekly capsules are a widely-prescribed antidepressant. Both 
Teva and Barr have generic products in development for the fluoxetine 
weekly capsules market. There are few firms that are capable of, and 
interested in, entering these markets.
    Oral contraceptives are pills taken by mouth to prevent ovulation 
and pregnancy. They are the most common method of reversible birth 
control, used by 82 percent of women in the United States at some point 
during their reproductive years.
    The thirteen oral contraceptive markets include two markets where 
both Teva and Barr participate, ten markets where Barr participates and 
Teva has a product in development and one market where both Teva and 
Barr have products in development. The two markets where both Barr and 
Teva currently participate--generic Ortho-Cyclen[reg] and generic Ortho 
Tri-Cyclen[reg]--are already highly concentrated. A combined Teva and 
Barr would have 68 percent of the generic Ortho-Cyclen[reg] market and 
51 percent of the generic Ortho Tri-Cyclen[reg] market. Watson is the 
only other supplier in each of these markets.
    Barr also competes in ten oral contraceptive markets where Teva is 
developing a competing product. These markets include generic products 
that are equivalent to Ortho-Cept[reg], Mircette[reg], Triphasil[reg], 
Alesse[reg], OrthoNovum[reg] 1-35, OthroNovum[reg] 7/7/7, Loestrin[reg] 
FE (1mg/.02 mg & 1.5 mg/.03 mg), Loestrin[reg] FE (1mg/.2 mg), 
Loestrin[reg] FE 24, and Ovcon[reg] 35. In each of these relevant 
markets, Teva is one of a limited number of firms capable of developing 
a generic oral contraceptive product that would compete in each of 
these markets, and is well-positioned to enter the markets in a timely 
manner. Both Teva and Barr are developing generic products equivalent 
to Ortho Tri-Cyclen[reg] Lo 28 and are two of a limited number of firms 
with this product in development.

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 Food and Drug 
Administration (``FDA'') drug approval requirements takes at least two 
years. Entry would not be likely because many of the relevant markets 
are relatively small and in decline, so the limited sales opportunities 
available to a new entrant would likely be 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 
each of the generic markets listed above. In generic pharmaceutical 
markets, pricing is heavily influenced by the number of competitors 
that participate in a given market. Here, the evidence shows that the 
prices of the generic pharmaceutical products at issue decrease with 
the entry of each additional competitor.
    Evidence gathered during the investigation confirms that pricing 
for the generic pharmaceutical products at issue in the transaction is 
driven by the number firms that compete in the markets. Customers 
consistently state that the price of a generic pharmaceutical decreases 
with the entry of the second, third and even fourth competitor. The 
evidence also indicates that the presence of four significant 
competitors allows customers to negotiate lower prices than is the case 
where there are fewer firms. The proposed transaction would eliminate 
one of at most four competitors in each of the relevant markets and 
would cause significant anticompetitive harm to consumers in the U.S. 
markets by eliminating actual, direct, and substantial competition 
between Teva and Barr and by increasing the likelihood that customers 
will pay 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 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 market. 
Pursuant to the Consent Agreement, Teva and Barr are required to divest 
certain rights and assets related to the Products to a Commission-
approved acquirer no later than ten days after the acquisition. 
Specifically, the proposed Consent Agreement requires that Teva divest 
the oral contraceptive products and trazodone to Qualitest and that 
Teva/Barr divest the remainder of the Products to Watson.
    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.
    Qualitest and Watson are well-positioned to manufacture and market 
their respective acquired Products and to compete effectively in those 
markets. Both Qualitest and Watson develop, manufacturer, sell, and 
distribute generic pharmaceuticals within the United States. Moreover, 
the divestitures to both companies do not present competitive problems 
of their own because neither competes in those markets. With their 
resources, capabilities, strong reputation, and experience marketing 
generic products, the two companies are expected to replicate the 
competition that would be lost with the proposed acquisition.
    If the Commission determines that either Watson or Qualitest is not 
acceptable acquirer of the assets to be

[[Page 79489]]

divested, or that the manner of the divestitures is not acceptable, the 
parties must unwind the sale and divest the assets within six months of 
the date the Order becomes final to another Commission-approved 
acquirer. If the parties fail to divest within six 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 Teva and Barr to 
provide transitional services to enable the Commission-approved 
acquirers 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 Teva or Barr. Most of the oral contraceptive 
products had been divested to Teva pursuant to a Commission Order in 
the matter of Watson Pharmaceuticals, Inc./Andrx Corporation, Docket 
No. C-4172 (October 31, 2006). This proposed D&O does not relieve 
Watson of any of its obligations pursuant to the Commission Order 
issued in the above referenced Watson/Andrx matter.
    The Commission has appointed William Rahe of Quantic Regulatory 
Services, LLC (``Quantic'') to oversee the asset transfer and to ensure 
Teva's and Barr's compliance with all of the provisions of the proposed 
Consent Agreement. Mr. Rahe is a senior consultant at 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 Teva and 
Barr 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. E8-30831 Filed 12-24-08: 8:45 am]
BILLING CODE 6750-01-S