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The Federal Trade Commission today announced a proposed consent order settling charges that Watson Pharmaceuticals, Inc.’s acquisition of Robin Hood Holdings Limited, owner of Arrow Pharmaceuticals, would have harmed consumers by eliminating future competition for important generic drugs used to treat Parkinson’s disease (cabergoline) and the side effects of chemotherapy (dronabinol). The Commission’s order requires the firms to sell assets related to the two drugs to FTC-approved buyers and to ensure the acquirers have the means to compete effectively in the future.

Under the order’s terms, Watson will sell its generic cabergoline product to Impax Laboratories Inc. Arrow will spin off its subsidiary, Resolution Chemicals, which is currently developing generic dronabinol, to a new entity, Reso Holdings, within 10 days of the acquisition. Arrow also must sell the U.S. marketing rights for generic dronabinol to Impax.

According to the Commission’s complaint, Watson’s acquisition of Arrow, as originally proposed, would violate federal antitrust law because it would lessen competition in the U.S. markets for generic cabergoline tablets and generic dronabinol capsules. The complaint alleges that the acquisition would reduce the number of generic suppliers in the market, which could raise the prices that patients pay for these drugs.

Cabergoline, the generic name of Pfizer’s Dostinex, is a dopamine receptor agonist used to treat Parkinson’s disease and medical problems related to the overproduction of the hormone prolactin. The $44.8 million U.S. market for the generic version of the drug is highly concentrated, and Arrow is one of only three suppliers in the United States. Watson has U.S. Food and Drug Administration approval to sell generic cabergoline, and is poised to enter the market within the next two years. Its proposed acquisition of Arrow, therefore, would eliminate its incentive to enter the market as a fourth generic alternative.

Dronabinol, the generic name for Solvay Pharmaceutical’s Marinol, is used to treat nausea and vomiting caused by chemotherapy, as well as loss of appetite and weight loss in HIV patients. The $74.4 million U.S. market for generic dronabinol is also highly concentrated, with only Watson and Par Pharmaceuticals currently supplying the drug. Arrow’s subsidiary, Resolution, is one of a limited number of companies developing a generic dronabinol product, and is planning to enter the market within two years. Thus, Watson’s proposed acquisition of Arrow would eliminate one of a limited number of potential competitors.

The FTC’s proposed consent order remedies the anticompetitive effects of the acquisition in both markets. It requires Watson to divest its generic cabergoline product to Impax, a California-based generic drug company with nearly 70 generic drugs currently on the market. The order also requires Arrow to spin-off its wholly-owned subsidiary, Resolution Chemicals, to a new entity, Reso Holdings, which will be owned in part by Resolution’s current management. Resolution’s managers are the original developers of Arrow’s generic dronabinol product and have been involved with all aspects of generic dronabinol development. As Reso Holdings will not have sales and marketing capabilities, however, the order also requires Arrow to sell the U.S. marketing rights for generic dronabinol to Impax. Combined, both divestitures preserve competition in the generic dronabinol market by allowing Resolution to continue dronabinol development as Reso Holdings and providing a capable marketing partner once generic dronabinol receives all necessary regulatory approvals.

The Commission vote approving the proposed consent order was 3-0, with Commissioner Harbour recused. The order will be subject to public comment for 30 days, until January 4, 2010, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. To submit a comment electronically, please click on: https://public.commentworks.com/ftc/watsonarrow.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

Copies of the complaint, consent order, and an analysis to aid in public comment can be found on the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular businesspractices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 091-0116)
(Watson-Arrow.final.wpd)