2011-10783. Hikma Pharmaceuticals PLC; Analysis of Agreement Containing Consent Orders To Aid Public Comment

AGENCY:

Federal Trade Commission.

ACTION:

Proposed consent agreement.

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 May 27, 2011.

ADDRESSES:

Interested parties are invited to submit written comments electronically or in paper form. Comments should refer to “Hikma, File No. 111 0051” to facilitate the organization of comments. Please note that your comment—including your name and your state—will be placed on the public record of this proceeding, including on the publicly accessible FTC Web site, at http://www.ftc.gov/​os/​publiccomments.shtm.

Because comments will be made public, they should not include any sensitive personal information, such as an individual'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. Comments also should not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, comments should 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 Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule 4.9(c), 16 CFR 4.9(c).^[1]

Because paper mail addressed to the FTC is subject to delay due to heightened security screening, please consider submitting your comments in electronic form. Comments filed in electronic form should be submitted by using the following Web link: https://ftcpublic.commentworks.com/​ftc/​hikmabaxter and following the instructions on the Web-based form. To ensure that the Commission considers an electronic comment, you must file it on the Web-based form at the Web link: https://ftcpublic.commentworks.com/​ftc/​hikmabaxter. If this Notice appears at http://www.regulations.gov/​search/​index.jsp,, you may also file an electronic comment through that Web site. The Commission will consider all comments that regulations.gov forwards to it. You may also visit the FTC Web site at http://www.ftc.gov/​ to read the Notice and the news release describing it.

A comment filed in paper form should include the “Hikma, File No. 111 0051” 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 H-113 (Annex D), 600 Pennsylvania Avenue, NW., Washington, DC 20580. 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.

The Federal Trade Commission Act (“FTC Act”) and other laws 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, whether filed in paper or electronic form. Comments received will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov/​os/​publiccomments.shtm. As a matter of discretion, the Commission makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. 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:

Kari A. 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, 38 Stat. 721, 15 U.S.C. 46(f), and § 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 April 27, 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 [phone].

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 Hikma Pharmaceuticals PLC (“Hikma”) that is designed to remedy the anticompetitive effects of Hikma's acquisition of certain assets from Baxter Healthcare Corporation, Inc. (“Baxter”). Under the terms of the proposed Consent Agreement, Hikma would be required to divest to X-Gen Pharmaceuticals, Inc. (“X-Gen”) all of Hikma's rights and assets relating to its generic injectable phenytoin and generic injectable promethazine products.

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 Asset Purchase Agreement dated October 29, 2010, Hikma proposes to acquire Baxter's generic injectable pharmaceutical business in a transaction valued at approximately $111.5 million (“Proposed Acquisition”). The assets to be sold include chronic pain, anti-infective, and anti-emetic products, along with Baxter' Cherry Hill, New Jersey manufacturing facility and Memphis, Tennessee warehouse and distribution center. 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 generic injectable phenytoin and generic injectable promethazine. The proposed Consent Agreement will remedy the alleged violations by replacing the competition that would otherwise be eliminated by the acquisition.

The Products and Structure of the Markets

The Proposed Acquisition would reduce the number of generic suppliers in each of the relevant markets. The number of generic injectable suppliers has a direct and substantial effect on pricing.

Phenytoin is an anti-convulsant drug used to control seizures and prevent them during or after surgery. In 2009, sales of injectable phenytoin totaled $1.5 million. The branded version of injectable phenytoin is no longer sold in the United States. The market for generic injectable phenytoin is highly concentrated; currently only Hikma, Baxter, and Hospira, Inc. (“Hospira”) sell the product in the United States. The acquisition of Baxter's injectable business by Hikma would therefore reduce the number of suppliers of injectable phenytoin from three to two.

Generic injectable promethazine is used to relieve or prevent some types of allergies or allergic reactions, to prevent and control motion sickness, nausea, vomiting, and dizziness, and to help people go to sleep and control their pain or anxiety before or after surgery. Sales of generic injectable promethazine totaled $17 million in 2009. The market for generic injectable promethazine is highly concentrated. Only three companies currently sell generic injectable promethazine in the United States: Hikma, Baxter, and Hospira. Hospira's competitive significance in this market is limited because it only offers a premium-priced pre-filled syringe, while Hikma and Baxter offer lower priced ampules and vials that appeal to a broader range of customers. A fourth company has approval to sell generic injectable promethazine in the United States and has historically offered the product, but it is not currently manufacturing the product and its re-entry date is currently unknown. Thus, the acquisition would result in a market with only one low-cost competitor.

Entry

Entry into the markets for the manufacture and sale of generic injectable phenytoin and generic injectable promethazine would not be timely, likely, or sufficient in 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 regulatory requirements, including Food and Drug Administration approval, takes at least two years. In addition to the regulatory hurdles facing a potential entrant, manufacturing difficulties in producing generic injectable products, combined with the small size of the markets in question, makes additional entry unlikely to occur.

Effects

The Proposed Acquisition would cause significant anticompetitive harm to consumers in the U.S. markets for the manufacture and sale of generic injectable phenytoin and generic injectable promethazine. In generic injectable pharmaceuticals markets, price generally decreases as the second, third, or fourth competitors enter. Thus, reducing the number of competitors to two and one in each market, respectively, would cause anticompetitive harm to consumers in these U.S. markets by increasing the likelihood that consumers would pay higher prices.

The Consent Agreement

The proposed Consent Agreement effectively remedies the Proposed Acquisition's anticompetitive effects in the relevant markets by requiring Hikma to divest certain rights and assets related to generic injectable phenytoin and generic injectable promethazine to a Commission-approved acquirer no later than ten days after the acquisition. 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.

The proposed Consent Agreement remedies the competitive concerns the acquisition raises by requiring Hikma to divest its generic injectable phenytoin and generic injectable promethazine products to X-Gen, which will purchase all rights currently held by Hikma. X-Gen is a New York-based generic injectable pharmaceutical company with 40 active products and an active product development pipeline. With its experience in generic injectable markets and strong ties to manufacturing partners, X-Gen is expected to replicate the competition that would otherwise be lost with the Proposed Acquisition.

If the Commission determines that X-Gen is not an acceptable acquirer of the assets to be divested, or that the manner of the divestitures is not acceptable, the parties must unwind the sale to X-Gen and divest the phenytoin and promethazine product lines, within six months of the date the Order becomes final, to a Commission-approved acquirer. The Commission may appoint a trustee to divest the products if Hikma fails to divest the products as required.

The proposed Consent Agreement contains several provisions to help ensure that the divestitures are successful. The Order requires Hikma to take all action to maintain the economic viability, marketability, and competitiveness of the products until such time as they are transferred to a Commission-approved acquirer. In addition, the parties must supply X-Gen with phenytoin and promethazine pursuant to a supply agreement while Hikma transfers the manufacturing technology to X-Gen or a third-party manufacturer of X-Gen's choice.

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.

Footnotes

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 FTC Rule 4.9(c), 16 CFR 4.9(c).