[Federal Register Volume 76, Number 242 (Friday, December 16, 2011)]
[Notices]
[Pages 78259-78261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32218]


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FEDERAL TRADE COMMISSION

[File No. 111-0215]


Valeant Pharmaceuticals International, 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 January 12, 2012.

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 ``Valeant-Sanofi, File 
No. 111-0215'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/valeantsanoficonsent, 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: Jacqueline K. Mendel (202) 326-2603), 
FTC, Bureau of Competition, 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

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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 
12, 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 January 12, 
2012. Write ``Valeant-Sanofi, File No. 111-0215'' 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/valeantsanoficonsent 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 ``Valeant-Sanofi, File No. 
111-0215'' 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 before January 12, 2012. 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.

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 Order (``Consent 
Agreement'') from Valeant Pharmaceuticals International, Inc. 
(``Valeant''), which is designed to remedy the anticompetitive effects 
of Valeant's acquisition of certain assets of Sanofi's dermatology 
unit, Dermik (``Dermik'').
    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'').
    Valeant proposes to acquire certain assets of Sanofi's dermatology 
unit, Dermik, in a transaction valued at approximately $425 million 
(``the Acquisition''). Both parties sell topical pharmaceutical 
products 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 (1) BenzaClin and (2) 
topical fluorouracil cream (``topical 5FU''). The proposed Consent 
Agreement remedies the loss of competition in these markets that would 
result from the Acquisition. Specifically, under the terms of the 
Consent Agreement, Valeant would be required to (1) divest all rights 
and assets related to generic BenzaClin, and (2) grant a perpetual, 
unrestricted license for the authorized generic of Efudex (``AG 
Efudex''). Valeant has proposed Mylan Inc. (``Mylan'') as the buyer of 
generic BenzaClin and AG Efudex assets.

II. The Products and the Structure of the Market

    Valeant's proposed acquisition of Dermik from Sanofi would create a 
monopoly in the BenzaClin market. Dermik manufactures and markets 
BenzaClin, which is a topical pharmaceutical product used to treat acne 
vulgaris, commonly known as acne. BenzaClin is a combination of 
clindamycin, an antibiotic, and benzoyl peroxide, an antimicrobial. 
Valeant owns the only Abbreviated New Drug Application (``ANDA'') for 
the generic version of BenzaClin, which it licenses to Mylan. Pursuant 
to that license, Mylan sells the only generic equivalent of BenzaClin 
in the United States and Valeant receives the vast majority of 
royalties from those sales. Currently Dermik's BenzaClin sales account 
for approximately 50 per cent of sales, while sales of Mylan's generic 
version account for the other approximate 50 per cent. The Acquisition 
would create a monopoly in this market.
    In addition, Valeant's proposed acquisition of Dermik is likely to 
result in anticompetitive effects in the market for topical 5FU 
products. Topical 5FU

[[Page 78261]]

products are used to treat actinic keratosis (``AK''), which is a pre-
cancerous lesion that can result from years of repeated sun exposure. 
Three branded topical 5FUs are currently on the market, including 
Valeant's Efudex and Dermik's Carac. There are also two generic 
versions of Efudex, as well as an ``authorized'' generic, also sold by 
Valeant. The price of the generic drugs in this market determines the 
pricing of branded Carac. Post-acquisition, Valeant's market share in 
the topical 5FU market would be over 50 per cent. Other treatments for 
AKs are not viable substitutes for topical 5FUs because they are more 
costly, less efficacious or impracticable.

III. Entry

    Entry into the manufacture and sale of both BenzaClin and topical 
5FU products is difficult, expensive and time consuming. Developing and 
obtaining U.S. Food and Drug Administration approval for the 
manufacture and sale of topical pharmaceuticals takes over two years 
due to substantial regulatory, technological and intellectual property 
barriers. Furthermore, entry would not be likely because the markets 
are relatively small, so the limited sales opportunities available to a 
new entrant would likely be insufficient to justify the time and 
investment necessary to enter.

IV. Effects of the Acquisition

    The proposed acquisition would cause significant anticompetitive 
harm to consumers in the U.S. markets for the manufacture and sale of 
both BenzaClin and topical 5FU products by eliminating actual, direct 
and substantial competition between Valeant and Sanofi in those 
markets. With respect to the BenzaClin market, the transaction would 
combine BenzaClin and its only generic equivalent, eliminating 
BenzaClin's closest competitor and creating a monopoly. The impact of 
eliminating the competition between BenzaClin and its only currently-
marketed generic equivalent, is highly likely to result in consumers 
paying higher prices.
    In the topical 5FU market, the transaction would give Valeant 
control over three linked treatments for AK--Dermik's branded Carac and 
Valeant's branded and AG Efudex products. The combination of these 
products at Valeant would eliminate head to head competition between 
Carac and the Efudex AG and is thus likely to result in higher prices 
for topical 5FUs.

V. The Consent Agreement

    The proposed Consent Agreement effectively remedies the 
acquisition's anticompetitive effects in the relevant markets by 
requiring Valeant to (1) divest its ANDA for generic BenzaClin to 
Mylan, and (2) supply an authorized generic of Efudex, pursuant to a 
license to Mylan. If approved, Mylan will acquire all rights and assets 
currently held by Valeant, including any existing inventory. The assets 
to be transferred include all manufacturing and research and 
development rights in the divested products.
    Mylan is a particularly well-suited acquirer of generic BenzaClin 
because it has been manufacturing and marketing the product, pursuant 
to an agreement with Valeant, since it was introduced in August 2009. 
Mylan is the second-largest generic pharmaceutical manufacturer in the 
United States, and is well-positioned to replicate the competition that 
would be lost with the proposed Valeant/Dermik acquisition. 
Headquartered in Pittsburgh, Pennsylvania, Mylan employs more than 
18,000 employees and generated approximately $5.45 billion in revenue 
in 2010. Mylan sells approximately 270 products and has a manufacturing 
facility where BenzaClin is manufactured. It is in the process of 
upgrading that facility to handle compounds such as 5FU.
    Mylan expects to begin manufacturing generic Efudex at that 
facility in 2013. Until that time, the proposed Consent Agreement 
contemplates Mylan's purchase of topical 5FU from Valeant pursuant to a 
supply agreement. In order to ensure that there is no supply 
interruption, the proposed Consent Agreement would require that Valeant 
build up a two-year inventory and establish its own manufacturing as a 
back-up supply until Mylan is able to manufacture Efudex commercially. 
Valeant would also be required to assist Mylan with developing its 
manufacturing capabilities and securing the necessary FDA approvals. 
With these provisions, Mylan will be able to compete in the 5FU market 
immediately following the divestiture and establish independent 
manufacturing as soon as practicable.
    The Commission has appointed Francis J. Civille as the Interim 
Monitor to oversee the asset transfer and to ensure Valeant's 
compliance with the provisions of the proposed Consent Agreement. Mr. 
Civille has over 27 years of experience in the pharmaceutical industry. 
He has extensive experience in areas such as pharmaceutical research 
and development, regulatory approval, manufacturing and supply, and 
marketing. Mr. Civille will oversee the transfer of Efudex 
manufacturing technology to the acquirer and ensure that Valeant is 
diligent in building up the required inventory of the product and 
establishing its own back-up supply capabilities. 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 the parties 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. 2011-32218 Filed 12-15-11; 8:45 am]
BILLING CODE 6750-01-P