[Federal Register Volume 76, Number 144 (Wednesday, July 27, 2011)]
[Notices]
[Pages 44924-44926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18932]


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FEDERAL TRADE COMMISSION

[File No. 091 0136]


Cardinal Health, Inc.; Analysis of Agreement Containing 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 August 22, 2011.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Cardinal Health, File 
No. 091 0136'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/cardinalhealthconsent, by following the 
instructions on the Web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue, NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: William H. Efron (212-607-2827), FTC 
Northeast Region, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

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 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 July 21, 2011), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. 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.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before June 10, 2011. 
Write ``Cardinal Health, File No. 091 0136'' on your comment. Your 
comment--including your name and your state--will be placed on the 
public record of this proceeding, including, to the extent practicable, 
on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the Commission tries to 
remove individuals' home contact information from comments before 
placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential,'' as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do 
not include competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/cardinalhealthconsent by following the instructions on the Web-
based form. If this Notice appears at http://www.regulations.gov/#!home, you also may file a comment through that Web site.
    If you file your comment on paper, write ``Cardinal Health, File 
No. 091 0136'' on your comment and on the envelope, and mail or deliver 
it to the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or

[[Page 44925]]

before July 1, 2011. You can find more information, including routine 
uses permitted by the Privacy Act, in the Commission's privacy policy, 
at http://www.ftc.gov/ftc/privacy.htm.

I. 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 Order (``Consent 
Agreement'') from Cardinal Health, Inc. (``Cardinal'') to remedy the 
anticompetitive effects stemming from Cardinal's acquisition of 
Biotech's nuclear pharmacies in the Southwestern United States. Under 
the terms of the Consent Agreement, Cardinal is required to 
reconstitute and divest to one or more Commission-approved acquirers, 
Cardinal's former nuclear pharmacies in Las Vegas, Nevada, Albuquerque, 
New Mexico, and El Paso, Texas, and to take certain additional measures 
to restore competition in nuclear pharmacy markets in Las Vegas, 
Albuquerque, and El Paso.
    On July 31, 2009, Cardinal acquired Biotech's nuclear pharmacies in 
Las Vegas, Albuquerque, and El Paso (the ``Acquisition'') pursuant to 
an Asset Purchase Agreement (``Agreement''). Prior to the Acquisition, 
both Cardinal and Biotech operated nuclear pharmacies in these cities. 
These nuclear pharmacies produced, distributed, and sold single photon 
emission computed tomography (``SPECT'') radiopharmaceuticals (also 
referred to as ``low energy radiopharmaceuticals'') to hospitals and 
cardiology clinics. The Commission's complaint alleges that the 
Acquisition and the Agreement violated 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, because the Acquisition and Agreement 
may substantially lessen competition or tend to create a monopoly in 
the production, sale, and distribution of low energy 
radiopharmaceuticals in Las Vegas, Albuquerque, and El Paso and 
surrounding local areas.
    The Consent Agreement has been placed on the public record for 30 
days for receipt of comments by interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will review the Consent Agreement and comments 
received and decide whether to withdraw the proposed Consent Agreement, 
modify it, or make final the Consent Agreement's proposed Decision and 
Order (``Order'').

II. Respondent Cardinal Health, Inc.

    Cardinal is a corporation organized, existing, and doing business 
under and by virtue of the laws of the State of Ohio, with its 
principal executive offices at 7000 Cardinal Place, Dublin, Ohio 43017. 
Cardinal, a $99 billion health care services company, is one of the 
leading suppliers of pharmaceuticals and medical products in the world. 
Cardinal is also a leading manufacturer of medical and surgical 
products, including gloves, surgical apparel, and fluid management 
products. In addition, Cardinal operates the nation's largest network 
of nuclear pharmacies.

III. The Products and Structure of the Markets

    Nuclear pharmacies provide radiopharmaceuticals to local hospitals 
and cardiology clinics, which use the products to diagnose and treat 
various diseases. Radiopharmaceuticals are drugs containing a 
radioactive isotope combined with a chemical compound. Due to the fact 
that the radioactive isotopes have short half-lives and decay rapidly, 
a nuclear pharmacy can only serve its local area. Accordingly, 
competition between nuclear pharmacies occurs at the local level.
    The Commission's complaint alleges that the relevant product market 
in which to assess the effects of the Acquisition is the production, 
sale, and distribution of SPECT radiopharmaceuticals or low energy 
radiopharmaceuticals. The Commission's complaint further alleges that 
the relevant geographic markets in which to analyze the effects of the 
Acquisition are (i) Albuquerque, New Mexico and surrounding areas (the 
``Albuquerque market''); (ii) El Paso, Texas and surrounding areas (the 
``El Paso market''); and (iii) Las Vegas, Nevada and surrounding areas 
(the ``Las Vegas market'').
    The Commission's complaint alleges that Cardinal and Biotech were 
the only two providers of low energy radiopharmaceuticals prior to the 
Acquisition in the Albuquerque market. As a result of the Acquisition, 
Cardinal holds a monopoly in the Albuquerque market. With respect to 
the El Paso market, the Commission's complaint alleges that Cardinal 
and Biotech were the only two providers of low energy pharmaceuticals 
prior to the Acquisition. As a result of the Acquisition, Cardinal held 
a monopoly in the El Paso market, until approximately November of 2010, 
when Rio Grande Nuclear Pharmacy, LLC opened in El Paso. Currently, 
Cardinal holds a large market share in the El Paso market. Finally, 
regarding the Las Vegas market, the Complaint alleges that prior to the 
Acquisition, there were three providers of low energy 
radiopharmaceuticals in the market. Cardinal and Biotech were the two 
leading providers, followed by Advanced Isotopes of Las Vegas. As a 
result of the Acquisition, Cardinal obtained and has since held a large 
market share in the Las Vegas market.

IV. Effects of the Acquisition

    The Commission's complaint charges that the Acquisition may 
substantially lessen competition in the Las Vegas, Albuquerque, and El 
Paso markets for the production, sale, and distribution of low energy 
radiopharmaceuticals, by, among other things, (i) eliminating the 
direct and substantial competition between Cardinal and Biotech; (ii) 
reducing the number of significant competitors in each relevant market 
giving Cardinal substantial market power; (iii) facilitating the 
ability of Cardinal to unilaterally exercise market power; (iv) 
reducing Cardinal's incentives to improve service or product quality or 
pursue further innovation; (v) increasing the likelihood of coordinated 
interaction among the remaining competitors; and (vi) allowing 
Cardinal, unconstrained by effective competition, to increase prices.

V. Entry

    The Commission's complaint alleges that entry into the relevant 
markets would not be timely, likely, or sufficient to prevent or deter 
the likely anticompetitive effects of the Acquisition. The Commission's 
complaint further alleges that entrants face significant barriers in 
capturing sufficient business to replicate the scale and strength of 
either Cardinal or Biotech prior to the Acquisition.

VI. Terms of the Order

    The Consent Agreement is designed to remedy the likely 
anticompetitive effects of the Acquisition by restoring, to the extent 
possible, the lost competition between Cardinal and Biotech in Las 
Vegas, Albuquerque, and El Paso. Specific terms of the Order are 
discussed further below.

A. Reconstitution and Divestiture of the Former Cardinal Nuclear 
Pharmacies to One or More Commission-Approved Acquirers

    Prior to the Acquisition, both Cardinal and Biotech operated 
nuclear pharmacies in Las Vegas, El Paso, and Albuquerque. After the 
Acquisition, Cardinal relocated its nuclear pharmacy business in these 
cities to the former

[[Page 44926]]

Biotech nuclear pharmacy locations and closed its Cardinal facilities. 
The Order requires that within six months of the date on which the 
Order is accepted for public comment, Cardinal must reconstitute each 
of the three former Cardinal nuclear pharmacies and divest each of the 
pharmacies to a Commission-approved acquirer.
    In connection with the divestiture of the three nuclear pharmacies, 
Cardinal is also required to divest to each acquirer the intellectual 
property related to the nuclear pharmacies owned by Biotech prior to 
the Acquisition. Cardinal must also obtain, maintain, and transfer to 
the acquirer(s) all regulatory approvals, licenses, qualifications, 
permits, or clearances that are necessary to operate a nuclear 
pharmacy. Finally, although, as stated above, the Commission must 
approve each acquirer, the Order specifically requires that Cardinal 
demonstrate that each acquirer has a supply of the two vital low energy 
radiopharmaceutical inputs, the radioisotope technetium 99 and a heart 
perfusion agent.

B. Customer Rights To Terminate Contracts With Cardinal

    To ensure that the acquirer(s) have the opportunity to compete for 
sufficient business to obtain viable scale and restore competition, the 
Order requires that Cardinal grant each of its customers in Las Vegas, 
Albuquerque, and El Paso the right to terminate, without penalty or 
charge, its existing contract with Cardinal for the purchase of 
radiopharmaceuticals. Specifically, any customer that purchased 
radiopharmaceuticals from either Cardinal's or Biotech's nuclear 
pharmacy in Las Vegas, Albuquerque, or El Paso, at any time between 
July 1, 2009 (30 days prior to the Acquisition) and the relevant 
closing date (i.e., the day on which Cardinal divests the reconstituted 
pharmacy in the customer's market), has the right to terminate its 
existing contract for radiopharmaceuticals with Cardinal. However, the 
Order does not grant customers the right to terminate 
radiopharmaceutical contracts with Cardinal that relate solely to the 
purchase of Positron Emission Tomography radiopharmaceuticals (also 
referred to as high energy radiopharmaceuticals).
    Pursuant to the Order, Cardinal is required to notify each relevant 
customer within five days after the relevant closing date of the 
customer's right to terminate its existing contact. The Order further 
requires that Cardinal will terminate any relevant customer's existing 
contract within 30 days upon receiving that customer's request to 
terminate. Relevant customers will have the option to terminate their 
existing contract with Cardinal for a period of 24 months from the 
relevant closing date.

C. Facilitating the Acquirer's Employment of Certain Cardinal and 
Former Biotech Employees

    To provide the acquirer(s) with access to any necessary employees, 
the Order requires Cardinal to facilitate and not interfere with the 
recruitment of certain former Biotech employees and current Cardinal 
nuclear pharmacy employees in Las Vegas, Albuquerque, and El Paso. Such 
employees also are released from any restrictions on their ability to 
work for the acquirer(s).

D. A Monitor Will Help Ensure Compliance

    The Order provides for the appointment by the Commission of an 
independent monitor with fiduciary responsibilities to the Commission, 
to help ensure that Cardinal carries out all of its responsibilities 
and obligations under the Order. The Order provides that Katherine L. 
Seifert, a person with significant experience in the 
radiopharmaceutical industry, shall serve as monitor. Ms. Seifert, 
currently of Seifert and Associates, Inc., provides consulting services 
for various clients in the radiopharmaceutical industry. In the event 
Cardinal fails to comply with its divestiture obligations, the Order 
also provides that the Commission may appoint a divestiture trustee to 
fulfill those requirements.

VII. Purpose of the Analysis To Aid Public Comment

    The purpose of this analysis is to facilitate public comment on the 
proposed Decision and Order. This analysis is not intended to 
constitute an official interpretation of the Consent Agreement and 
Order.

    By direction of the Commission, Commissioner Kovacic recused.
Richard C. Donohue,
Acting Secretary.
[FR Doc. 2011-18932 Filed 7-26-11; 8:45 am]
BILLING CODE 6750-01-P