Markets Wired

Pfizer Inc. has agreed to sell the rights and assets related to four pharmaceutical products in order to settle FTC charges that its proposed $16 billion acquisition of Hospira, Inc. is anticompetitive.

Pfizer is one of the world’s largest drug companies and principally competes with Hospira in markets for certain sterile injectable pharmaceutical products. The FTC settlement order preserves competition by requiring the companies to divest the following products to the U.S.-based generic pharmaceutical company Alvogen Group Inc.:

• Pfizer’s generic acetylcysteine inhalation solution. Used to treat respiratory disorders, acetylcysteine is inhaled into the lungs to aid in removing mucus. According to a complaint filed by the FTC, without the divestiture, the merger between Pfizer and Hospira would reduce the number of current generic suppliers in the U.S. from three to two, making it likely that prices would rise.
• Hospira’s clindamycin phosphate injection. An antibiotic used to treat lung, skin, blood, bone, joint, and gynecological infections, clindamycin phosphate is marketed under branded and generic labels that compete against each other on price in the U.S. market. Without the divestiture, the merger would reduce the number of current suppliers from four to three, making it likely that prices would rise.

• Hospira’s voriconazole injection. Pfizer markets the branded voriconazole injection Vfend, which is used to treat significant fungal infections and competes on price with the one generic version currently on the market. Hospira expects FDA approval for its voriconazole injection drug in May 2016. Without the divestiture, the merger would eliminate one of a limited number of firms likely to enter the U.S. market with this product in the near future, thereby delaying beneficial competition and further price decreases.

• Hospira’s melphalan hydrochloride injection. A branded and a generic version of this chemotherapy agent now compete against each other on price in the U.S. market. Pfizer and Hospira both have generic versions under development, and no other company is as well positioned as these two firms are to enter this market. Without the divestiture, the merger would eliminate one of a limited number of firms likely to enter the U.S. market with this product in the near future, thereby delaying beneficial competition and further price decreases.

As the proposed buyer, Alvogen has the necessary resources, financial and technical capabilities, and experience marketing generic pharmaceutical products that will enable it to successfully replace the competition that otherwise would have been lost through the proposed acquisition.

The proposed order requires Pfizer to supply Alvogen with the clindamycin phosphate injection product for three years while Pfizer transfers the manufacturing technology to Alvogen or its designee. Pfizer also is required to provide transitional services to Alvogen to assist with establishing manufacturing capabilities and securing FDA approvals to market all of the divested products. The proposed order also allows the Commission to appoint a monitor to oversee the merging parties’ compliance with their obligations under the settlement agreement. Further details about the divestitures 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 5-0. 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 September 23, 2015, 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 $16,000 per day.

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@ftc.gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.