[Federal Register Volume 78, Number 211 (Thursday, October 31, 2013)]
[Notices]
[Pages 65313-65315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25847]


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FEDERAL TRADE COMMISSION

[File No. 131 0152]


Actavis, Inc. a corporation, and Warner Chilott PLC; 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 orders--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before November 12, 2013.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/activiswarnerconsent online or on paper, 
by following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Actavis Warner, File 
No. 131 0152'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/actaviswarnerconsent 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: Keri Wallace (202-326-3085), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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, 2013), 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 November 12, 
2013. Write ``Actavis Warner, File No. 131 0152'' 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 privileged or confidential,'' as discussed 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/actaviswarnerconsent 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 ``Actavis Warner, File No. 
131 0152'' 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 November 12, 2013. 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

    The Federal Trade Commission (``Commission'') has accepted, subject 
to

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final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Actavis, Inc. (``Actavis'') and Warner Chilcott plc 
(``Warner Chilcott'') that is designed to remedy the anticompetitive 
effects of Actavis's proposed acquisition of Warner Chilcott. Under the 
terms of the proposed Consent Agreement, Actavis would be required to 
divest to Amneal Pharmaceuticals L.L.C. (``Amneal'') all of Actavis's 
rights and assets relating to generic versions of the drugs Femcon FE, 
Loestrin 24 FE, Lo Loestrin FE, and Atelvia. Actavis will also enter 
into an agreement to supply generic versions of the Femcon FE and 
Loestrin 24 FE products to Amneal for a period of two years, which 
Amneal has the option to extend for up to two additional one-year terms 
if it chooses.
    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 a Transaction Agreement dated May 19, 2013, Actavis 
proposes to acquire Warner Chilcott in a transaction valued at 
approximately $8.5 billion (``Proposed Acquisition''). 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 Federal Trade Commission Act, as amended, 15 U.S.C. 
45, by lessening competition in the U.S. markets for (1) Generic Femcon 
FE, (2) Loestrin 24 FE and its generic equivalents, (3) Lo Loestrin FE 
and its generic equivalents, and (4) Atelvia and its generic 
equivalents. The proposed Consent Agreement will remedy the alleged 
violations by replacing the competition that would otherwise be 
eliminated by the Proposed Acquisition.

The Impact of Generics in Pharmaceutical Markets

    In human pharmaceutical product markets, price generally decreases 
as the number of generic competitors increases. Accordingly, the 
reduction in the number of suppliers within each relevant market has a 
direct and substantial effect on pricing. When the first generic 
version of a drug enters the market, it typically competes by selling 
at a discount to the branded drug. At that point, the brand typically 
loses most of its sales to the generic version. During the period in 
which only one generic product is available, the price for the branded 
product acts as a ceiling above which the generic manufacturer cannot 
price its product. In most cases, once additional generic versions of 
the drug enter the market, competition among the generic competitors 
drives generic pricing down further. Prices continue to decrease 
incrementally with the entry of the second, third, fourth, and even 
fifth generic oral pharmaceutical competitor.
    Generic drugs are typically launched upon the expiration of the 
branded product's patents. If the generic company intends to launch its 
product before the expiration of the branded product's patents, it must 
notify the FDA and certify that its product does not infringe the 
branded company's patent or that the branded company's patents are 
invalid. This is referred to as a Paragraph IV certification. A 
Paragraph IV certification typically leads to patent infringement 
litigation between the generic company and branded company. The first 
company to file a Paragraph IV ANDA has the right to market its generic 
drug exclusively for a period of 180 days if it is successful in its 
litigation against the branded drug manufacturer.\2\ No other firm, 
even those that subsequently submit Paragraph IV ANDAs, may enter the 
generic market until after the conclusion of this marketing exclusivity 
period. The prospect of earning higher profits as the only firm 
marketing a generic version of a drug for 180 days provides an 
incentive to defend against the patent infringement claims brought by 
the brand drug manufacturer. Thus, the firm with exclusivity usually 
takes the leading role, and invests the greatest resources, in these 
cases.
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    \2\ Uncertainty occasionally exists regarding whether a 
Paragraph IV ANDA has been filed properly, which creates uncertainty 
about whether a company is eligible to receive marketing exclusivity 
rights from the FDA. In addition, the FDA sometimes determines that 
more than one company is eligible for market exclusivity rights 
based on the timing of their filings.
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The Proposed Acquisition Would Reduce the Number of Suppliers in the 
Four Relevant Markets

    Femcon FE is a chewable oral contraceptive tablet that contains 
progestin and estrogen. Warner Chilcott manufactures and markets the 
branded version of the drug. Only two companies--Warner Chilcott (via 
an authorized generic it supplies to Lupin Ltd.\3\) and Actavis--
currently sell significant volumes of generic Femcon FE in the United 
States. Teva Pharmaceutical Industries Ltd. (``Teva'') also has 
approval from the FDA to sell generic Femcon FE, but it has made only 
de minimis sales of this product since 2011. In 2012, Actavis had 
approximately 70 percent of generic sales, while Warner Chilcott had 
approximately 30 percent. Therefore, the proposed acquisition combines 
two of the three firms approved to supply generic Femcon FE, and the 
only two significant suppliers of this drug today.
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    \3\ Branded pharmaceutical companies, such as Warner Chilcott, 
manufacture authorized generic products for sale under a non-brand 
label at generic prices. In this case, Warner Chilcott has 
contracted with Lupin to market the authorized generic version of 
Femcon FE, though in other markets a branded drug company may market 
its own generic product.
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    Loestrin 24 FE is a low-dose progestin/estrogen combination oral 
contraceptive product. Warner Chilcott manufactures and markets the 
branded version of the drug. No companies currently market a generic 
version of Loestrin 24 FE. Actavis is likely to be the first generic 
supplier to compete against Warner Chilcott and no other firm is likely 
to enter the market for generic Loestrin 24 FE in time to prevent the 
anticompetitive effects from the Proposed Acquisition.
    Lo Loestrin FE is another low-dose progestin/estrogen combination 
oral contraceptive product. Warner Chilcott manufactures and markets 
the branded version of the drug. No companies currently market a 
generic version of Lo Loestrin FE, but Lupin and Actavis each plan to 
launch a generic product. Both companies are currently engaged in 
patent litigation with the brand drug manufacturer, but it remains 
uncertain which firm would receive marketing exclusivity rights from 
the FDA if it succeeded in defending against Warner Chilcott's claims. 
Thus, absent the acquisition, Actavis may be the first and only generic 
competitor to the Warner Chilcott branded product for a period of 180 
days.
    Atelvia is a delayed-release tablet containing risedronate sodium 
that is used to treat postmenopausal osteoporosis. Warner Chilcott 
markets the branded version of the drug. No generic version of the 
product is currently available in the United States. Actavis, Teva, and 
Ranbaxy Laboratories Limited all plan to market generic versions of 
Atelvia, and all three companies are currently engaged in patent 
litigation with Warner Chilcott. However, uncertainty remains about 
which one will have marketing exclusivity rights if successful in the 
litigation. Thus, absent the acquisition, Actavis may be the first and 
only generic competitor to Warner Chilcott's

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branded product for a period of 180 days.

Entry Into the Relevant Markets

    Entry Into the markets for generic Femcon FE, Lo Loestrin 24 and 
its generic equivalents, Loestrin 24 FE and its generic equivalents, 
and Atelvia and its generic equivalents would not be timely, likely, or 
sufficient in magnitude, character, and scope to deter or counteract 
the anticompetitive effects of the acquisition. De novo entry would not 
take place in a timely manner because the combination of drug 
development times and FDA approval requirements would delay entry by at 
least two years. Even companies for which the FDA approval process is 
well underway face additional barriers, including Hatch-Waxman 
regulatory exclusivity and pending patent litigation, that prevent them 
from entering these markets in time to deter the price increases that 
would occur after consummation of the Proposed Acquisition.

The Anticompetitive Effects of the Acquisition

    The Proposed Acquisition would cause significant anticompetitive 
harm to consumers in the U.S. markets for generic Femcon FE, Lo 
Loestrin 24 and its generic equivalents, Lo Loestrin FE and its generic 
equivalents, and Atelvia and its generic equivalents. The Proposed 
Acquisition would eliminate the current competition between the only 
two significant suppliers of generic Femcon FE, leading to 
significantly higher prices for this drug. The acquisition may also 
delay the onset of beneficial generic competition in the markets for 
Loestrin 24 FE, Lo Loestrin FE, and Atelvia. Evidence, including 
information regarding the status of the FDA approval process for 
potential suppliers of generic Loestrin 24 FE, suggests that Actavis 
will be the first generic supplier to compete against Warner Chilcott's 
branded product. Moreover, no other generic supplier is likely to enter 
the market for a significant period of time. Thus, the combined firm 
would likely delay the entry of Actavis's generic version of Loestrin 
24 FE or, at a minimum, cause Actavis's generic drug to compete less 
vigorously against Warner Chilcott's branded product, resulting in 
higher prices for consumers. Similarly, in the markets for Lo Loestrin 
FE and Atelvia, Actavis may be the first and only generic competitor to 
Warner Chilcott's branded products for a significant period absent the 
Proposed Acquisition. By eliminating this potential competition between 
Warner Chilcott and Actavis in each of these markets, the Proposed 
Acquisition would harm U.S. consumers by substantially increasing the 
likelihood of higher post-acquisition prices for Lo Loestrin FE and 
Atelvia.

The Proposed Consent Agreement

    The proposed Consent Agreement effectively remedies the Proposed 
Acquisition's anticompetitive effects in the relevant markets by 
requiring Actavis to divest to Amneal certain rights and assets related 
to generic Femcon FE, generic Loestrin 24 FE, generic Lo Loestrin FE, 
and generic Atelvia no later than ten days after consummating the 
acquisition. In addition, the Consent Agreement requires Actavis to 
enter into a supply agreement to provide Amneal with generic versions 
of the Femcon FE and Loestrin 24 FE products to sell in the United 
States for up to four years. Amneal is a New Jersey-based generic 
pharmaceutical company that currently markets 65 products and maintains 
an active product development pipeline. With its experience in generic 
markets, Amneal is well positioned to replicate the competition that 
would otherwise be lost as a result of 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 is not acceptable, Actavis must unwind the sale to Amneal 
and divest the products within six months of the date the Order becomes 
final, to a Commission-approved acquirer. If Actavis fails to divest 
the products as required, the Commission may appoint a trustee to 
divest the products.
    The proposed Consent Agreement contains several provisions to help 
ensure that the divestitures are successful. The Order requires Actavis 
to maintain the economic viability, marketability, and competitiveness 
of the divestiture products until such time as they are transferred to 
Amneal or another Commission-approved acquirer. Actavis must also 
transfer the manufacturing technology for the divestiture products to 
Amneal and supply Amneal with the generic Femcon FE and Loestrin 24 FE 
products during the transition period. In addition, the Consent 
Agreement requires Actavis to relinquish any claim to marketing 
exclusivity for generic Lo Loestrin FE and Atelvia products to ensure 
that the incentives of the companies currently leading the patent 
litigations relating to those products do not change.
    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. 2013-25847 Filed 10-30-13; 8:45 am]
BILLING CODE 6750-01-P