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The Federal Trade Commission will require Hikma Pharmaceuticals PLC (Hikma) to divest two generic injectable pharmaceuticals – phenytoin and promethazine – as part of a settlement allowing it to acquire certain assets from Baxter Healthcare Corporation, Inc. (Baxter). Hikma proposes to acquire Baxter’s entire generic injectable pharmaceutical business for $111.5 million, including Baxter’s Cherry Hill, New Jersey, manufacturing facility and a warehouse and distribution center in Memphis, Tennessee.

According to the FTC, without the relief the divestiture provides, the acquisition would be anticompetitive and likely would result in higher prices for the two drugs. The proposed settlement is the latest example of the FTC’s ongoing efforts to preserve competition in U.S. pharmaceutical markets.

Phenytoin is an anti-convulsant drug used to control and prevent seizures during or after surgery. In 2009, sales of injectable phenytoin totaled $1.5 million. Promethazine is used to prevent some types of allergies or allergic reactions, to prevent or control motion sickness, nausea, vomiting, and dizziness, and to help patients go to sleep and control their pain or anxiety before or after surgery. U.S. sales of generic injectable promethazine totaled $17 million in 2009.

According to the FTC’s complaint, Hikma’s acquisition of Baxter’s generic injectable phenytoin and promethazine businesses would be anticompetitive and in violation of federal law. As originally proposed, the acquisition would eliminate competition between Hikma and Baxter, which likely would harm consumers by increasing prices for both products. Specifically, the complaint alleges that the U.S. markets for both products are already highly concentrated, with only Hikma, Baxter, and Hospira, Inc. currently competing to provide phenytoin and promethazine. Accordingly, the proposed acquisition would reduce the number of suppliers in each market from three to two.

The proposed settlement order resolves the agency’s competitive concerns related to the deal. It requires Hikma, within 10 days of the acquisition, to divest certain rights and assets related to generic injectable phenytoin and promethazine to X-Gen Pharmaceuticals Inc. (X-Gen), which is based in New York. According to the FTC, X-Gen, a pharmaceutical firm with 40 products and an active product development pipeline, will be able to replace the competition that the acquisition otherwise would have eliminated, protecting customers for the two drugs.

The Commission vote approving the complaint and proposed consent order was 5-0. The order will be published in the Federal Register subject to public comment for 30 days, until May 27, 2011, after which the Commission will decide whether to make it final. Comments can be submitted electronically here.

NOTE: The Commission issues a 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. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order 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 public comment are available from 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, D.C. 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 business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Room 394, 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. “Like” the FTC on Facebook and “follow” us on Twitter.

(FTC File No. 111-0051)