Markets Wired

The Federal Trade Commission will require healthcare companies Fresenius Medical Care AG & KGaA (Fresenius) and NxStage Medical, Inc. (NxStage) to divest all rights and assets related to NxStage’s bloodline tubing set business to B. Braun Medical, Inc. (B. Braun) as part of a settlement resolving charges that Fresenius’s proposed $2 billion acquisition of NxStage likely would be anticompetitive.

The FTC’s complaint alleges that the proposed merger would harm competition in the U.S. market for bloodline tubing sets that are compatible with hemodialysis machines used in clinics that treat chronic renal failure. Bloodline tubing sets are single-use plastic tube sets used during hemodialysis treatments.

The complaint alleges that the acquisition as proposed would likely result in substantial competitive harm to consumers in the U.S. market for bloodline tubing sets used in hemodialysis treatment. Fresenius and NxStage are two of only three significant suppliers of bloodline tubing sets used in open architecture hemodialysis machines in the United States. Fresenius and NxStage together control 82 percent of the market for bloodlines.

Eliminating the head-to-head competition between Fresenius and NxStage in this highly concentrated market would allow the combined firm to exercise market power unilaterally, resulting in higher prices, reduced innovation, and less choice for customers in this market. The complaint further alleges that new entry into this market is difficult, expensive, and unlikely to alleviate the competitive harm.

The proposed settlement seeks to maintain competition in the U.S. market for bloodline tubing sets and requires Fresenius and NxStage to divest to B. Braun all assets and rights to research, develop, manufacture, market, and sell NxStage’s bloodline tubing sets. As explained in the accompanying analysis to aid public comment, the parties must complete the divestitures and relinquish their rights to B. Braun no later than 10 days after the acquisition becomes final.

To ensure the divestiture is successful and to maintain continuity of supply, the proposed order requires the parties to supply B. Braun with bloodline tubing sets for a limited time, while it establishes its own manufacturing capability. The Commission has agreed to appoint a monitor to ensure that Fresenius and NxStage comply with all of their obligations under the order.

If the Commission determines that B. Braun is not an acceptable buyer, or that the manner of the divestiture is not acceptable, the proposed order requires the parties to unwind the sale of rights to B. Braun and then divest the products to an FTC-approved buyer or buyers within six months of when the order becomes final.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 3-2. Chairman Joseph J. Simons, Commissioner Noah Joshua Phillips, and Commissioner Christine S. Wilson issued a statement. Commissioner Rohit Chopra and Commissioner Rebecca Kelly Slaughter issued dissenting statements.

The FTC will publish the consent package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through March 21, 2019, 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 $42,530.

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