Markets Wired

Baxter International Inc. and Claris Lifesciences Limited have agreed to divest two types of pharmaceutical products to settle Federal Trade Commission charges that Baxter’s proposed $625 million acquisition of Claris’ injectable drugs business is anticompetitive.

According to a complaint filed by the FTC, the acquisition as proposed is likely to:

• reduce current competition in the United States for the antifungal agent fluconazole in saline intravenous bags, which is used to treat fungal and yeast infections. In the U.S. market, Illinois-based Baxter and India-based Claris are two of only four significant competitors selling fluconazole in saline intravenous bags and have a combined estimated market share of nearly 60 percent.
• reduce imminent, future competition in the U.S. market for intravenous milrinone, which dilates the blood vessels, lowers blood pressure and allows blood to flow more easily through the cardiovascular system. Used as a short-term treatment for life-threatening heart failure, intravenous milrinone is currently sold in the United States by three companies – Baxter, Hikma and Pfizer. Claris is expected to enter this market shortly, once its pending application at the FDA is approved.

In generic pharmaceutical markets like those at issue here, reducing the number of significant suppliers from four to three is likely to harm consumers through higher drug prices. Similarly, in a market with three current suppliers, depriving consumers of a pending, fourth viable supplier is likely to maintain prices at higher levels than would have occurred had the expected entry occurred.

Under the proposed settlement, the parties will divest all of Claris’s rights to fluconazole in saline intravenous bags and milrinone in dextrose intravenous bags to New Jersey-based pharmaceutical company Renaissance Lakewood LLC. Also under the order, if the Commission determines that Renaissance is not an acceptable acquirer, or that the divestiture is not carried out in an acceptable way, the parties are required to unwind the sale of rights to Renaissance and divest the products to a Commission-approved acquirer within six months of the date the order becomes final. The Commission may also appoint a trustee in the event that the parties fail to divest the products as required, and may appoint an Interim Monitor to ensure the parties’ compliance with the Commission’s order, including the parties’ transfer of the relevant business information and provision of the specified transition services.

The order requires Baxter to supply Renaissance with fluconazole in saline intravenous bags and milrinone in dextrose intravenous bags for up to five years while transferring the manufacturing technology to Renaissance or its contract manufacturing designee. Baxter is also required to assist Renaissance in establishing its manufacturing capabilities and securing the necessary FDA approvals.

Further details about the consent agreement are set forth in the analysis to aid public comment for this matter.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 2-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through August 21, 2017, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 $40,654.

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