Markets Wired

International drug manufacturer Actavis, Inc. has agreed to sell all rights and assets to four generic pharmaceuticals – three oral contraceptives and an osteoporosis treatment – to settle FTC charges that its proposed $8.5 billion acquisition of drug-maker Warner Chilcott plc would be anticompetitive.  As part of the proposed settlement, Actavis is seeking FTC approval to sell the rights and assets for each drug to New Jersey-based Amneal Pharmaceuticals L.L.C.

The FTC’s proposed order is designed to preserve competition in each of the following pharmaceutical markets:

• Generic Femcon FE, a chewable oral contraceptive tablet that contains progestin and estrogen;
• Loestrin 24 FE and its generic equivalents, which are low-dose progestin/estrogen combination oral contraceptives;
• Lo Loestrin FE and its generic equivalents, which are also progestin/estrogen combination oral contraceptives; and
• Atelvia and its generic equivalents, which are delayed-release tablets used to treat post-menopausal osteoporosis.

According to the FTC’s complaint, Actavis and Warner Chilcott are the only two significant manufacturers of generic Femcon FE, and the proposed acquisition would eliminate current competition between them in the market for this drug.  For pharmaceutical products, the price generally decreases as the number of generic competitors increases.  Accordingly, the reduction in the number of suppliers likely would have a direct and substantial effect on pricing. 

In the other three markets, Warner Chilcott sells the branded drugs, but no company currently sells a generic version of Loestrin 24 FE, Lo Loestrin FE, or Atelvia.  According to the FTC’s complaint, Actavis is likely to be the first generic supplier to compete with Warner Chilcott’s branded versions of these three drugs.  Thus, the proposed acquisition would likely result in higher prices for U.S. consumers, because the merged firm would have the ability to delay the entry of Actavis’s generic product in each of these markets.

More information on the branded and generic manufacturers of these products, as well as the respective market shares of the companies, can be found in the analysis to aid public comment on the Commission’s website.

The proposed consent order requires Actavis to sell to Amneal all of Actavis’s rights and assets related to its generic versions of Femcon FE, Loestrin 24 FE, Lo Loestrin FE, and Atelvia.  It also requires Actavis to enter into an agreement to supply generic versions of Femcon FE and Loestrin 24 FE to Amneal for two years, after which Amneal may extend the agreement for two more years.  With 65 other generic products already on the market, the FTC believes Amneal has the expertise to replicate the competition for the four drugs that otherwise would have been lost through the proposed acquisition. 

Finally, the proposed order requires Actavis to relinquish its claim to first filer marketing exclusivity for generic Lo Loestrin FE and Atelvia products to preserve the incentives of the companies currently leading the patent litigations against Warner Chilcott related to those products.

The Commission vote to accept the consent agreement containing the proposed consent order for public comment was 4-0.  The FTC will publish a description of 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 October 28, 2013, after which the Commission will decide whether to make the proposed consent order final.  Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.  Comments also can be submitted electronically.

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.

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 of Competition 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, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001.  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.