FR Doc 03-309

[Federal Register: January 8, 2003 (Volume 68, Number 5)]
[Notices]
[Page 1062-1065]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08ja03-38]

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FEDERAL TRADE COMMISSION

[File No. 021 0171]

Baxter International, Inc., and Wyeth Corporation; Analysis To
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.

DATES: Comments must be received on or before January 18, 2003.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW.,
Washington, DC 20580. Comments filed in electronic form should be
directed to: consentagreement@ftc.gov, as prescribed below.

FOR FURTHER INFORMATION CONTACT: Joanne Lewers, FTC, Bureau of
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202)
326-2667.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and section 2.34
of the Commission's rules of practice, 16 CFR 2.34, notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of 30 days. The following analysis to aid public
comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC home page
(for December 20, 2002), on the World Wide Web, at ``http://www.ftc.gov/os/2002/12/index.htm.
'' A paper copy can be obtained from
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue,
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. Comments filed in paper form should
be directed to: FTC/Office of the Secretary, Room 159-H, 600
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains
nonpublic information, it must be filed in paper form, and the first
page of the document must be clearly labeled ``confidential.'' Comments
that do not contain any nonpublic information may instead be filed in
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as
part of or as an attachment to email messages directed to the following
email box: consentagreement@ftc.gov. Such comments will be considered
by the Commission and will be available for inspection and copying at
its principal office in accordance with section 4.9(b)(6)(ii) of the
Commission's rules of practice, 16 CFR 4.9(b)(6)(ii)).

Analysis of Agreement Containing Consent Orders To Aid Public Comment

The Federal Trade Commission has accepted, subject to final
approval, an agreement containing consent orders (``Consent
Agreement'') from Baxter International Inc. and Wyeth. The Consent
Agreement contains an order to maintain assets to preserve, among other
things, the viability, marketability, and

[[Page 1063]]

competitiveness of the assets to be divested pending their divestiture.
The Consent Agreement also contains a decision and order that is
designed to remedy the anticompetitive effects of Baxter's proposed
acquisition of the generic injectable pharmaceutical business of Wyeth.
Under the terms of the Consent Agreement, the companies will be
required to: (1) Divest all of Wyeth's assets relating to propofol to a
Commission-approved acquirer; (2) terminate all of Baxter's rights and
interests in GensiaSicor's pancuronium, vecuronium, and metoclopramide
products, and divest all of its pancuronium, vecuronium, and
metoclopramide assets to GensiaSicor; and (3) terminate Baxter's co-
marketing agreement with Watson Pharmaceuticals, Inc. by March 14,
2004.
The proposed Consent Agreement has been placed on the public record
for 30 days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After 30 days, the Commission will again review the agreement and any
comments received and will decide whether it should withdraw from the
agreement or make final the agreement's proposed Consent Order.
Pursuant to an asset purchase agreement dated June 8, 2002, between
Baxter and Wyeth, Baxter proposes to acquire from Wyeth substantially
all of the assets related to Wyeth's generic injectable pharmaceutical
business operated by Wyeth's ESI Lederle division for a total of $316
million in cash and assumed liabilities. The Commission's complaint
alleges that the proposed acquisition, if consummated, would constitute
a violation of section 7 of the Clayton Act, as amended, 15 U.S.C. 18,
and section 5 of the Federal Trade Commission Act, as amended, 15
U.S.C. 45, in the markets for the manufacture and sale of: (1)
Propofol; (2) pancuronium; (3) vecuronium; (4) metoclopramide; and (5)
new injectable iron replacement therapies (``NIIRTs''). The proposed
Consent Agreement would remedy the alleged violations by replacing in
each of these markets the lost competition that would result from the
merger.

Propofol

Propofol is a general anesthetic commonly used for the induction
and maintenance of anesthesia during surgical procedures and as a
sedative for patients who are mechanically ventilated. Although there
are other anesthetic agents, there are many benefits associated with
propofol including the ability to quickly adjust the amount of sedation
and its superior safety profile. Because propofol has a short duration
profile, it is the preferred anesthetic agent for out-patient surgery.
Annual U.S. sales of propofol total between $375 and $400 million.
The market for propofol is highly concentrated. AstraZeneca sells
Diprivan[reg], the branded propofol product. Baxter markets the only
generic propofol product, which is manufactured by GensiaSicor. Wyeth
is seeking approval from the Food and Drug Administration (``FDA'') for
its own propofol product, and it is one of the two best-positioned
firms to enter the market.
Entry into the propofol market requires lengthy development efforts
because of the product's unique characteristics. Propofol is considered
to be one of the most difficult injectable products to develop. Indeed,
only one company has been able to introduce a generic propofol product.
Propofol is manufactured using a complex process, and it requires the
use of a preservative. The preserved formulation used for Diprivan[reg]
and the preserved formulation used for the generic propofol marketed by
Baxter are both protected by patents. For this reason, any new entrant
would have to develop a propofol product using a different preservative
that does not infringe existing patents. Once a company has developed a
viable product, it is also required to conduct studies and obtain
approval from the FDA to market propofol. Clinical development and FDA
approval for this particular generic drug takes several years.
The proposed acquisition would cause significant anticompetitive
harm in the U.S. market for the manufacture and sale of propofol by
eliminating potential competition between Baxter and Wyeth. With only
two firms currently supplying propofol to customers in this market
(Baxter and AstraZeneca), entry by Wyeth and the one other firm well-
positioned to enter would likely increase competition and reduce
propofol prices. Accordingly, allowing Baxter to acquire Wyeth's
generic injectable business likely would reduce the number of rivals in
the future from four to three and force customers to pay higher prices
for propofol.
The proposed Consent Agreement preserves future competition in the
market for propofol by requiring the parties to divest Wyeth's propofol
assets to Faulding Pharmaceutical Company no later than 10 business
days after the acquisition. Faulding is well-positioned to continue
Wyeth's development efforts and poses no separate competitive concerns
as the acquirer of the propofol assets. If the Commission determines
that Faulding is not an acceptable purchaser, or that the manner of
divestiture is not acceptable, Baxter and Wyeth must divest the
propofol assets to a Commission-approved buyer no later than 90
business days from the date the Order becomes final. Should they fail
to do so, the Commission may appoint a trustee to divest the propofol
assets. The Consent Agreement also requires the parties to license
certain additional know-how that relates, but does not exclusively
relate, to propofol to the propofol acquirer.
The Consent Agreement contains several provisions designed to
ensure that the divestiture is successful. Baxter and Wyeth are
required to provide transitional services to the propofol acquirer
relating to regulatory approvals and manufacturing, and in responding
to, and defending against, any lawsuit, investigation or proceeding
relating to propofol. The Consent Agreement also requires Baxter and
Wyeth to provide incentives to certain employees to continue in their
positions until the divestiture is accomplished. For a period of six
months from the date the assets are divested, Baxter and Wyeth will
provide the propofol acquirer an opportunity to enter into employment
contracts with individuals who have experience relating to Wyeth's
propofol product. Baxter and Wyeth are also required to provide
incentives to these individuals to accept employment with the propofol
acquirer. For a period of one year following the divestiture date,
Baxter and Wyeth are prohibited from hiring any employees of the
acquirer of the propofol assets who have responsibility related to
propofol. Finally, Baxter and Wyeth must take steps to maintain the
confidentiality of confidential information related to propofol.

Pancuronium

Pancuronium is a rapid-onset, long-acting neuromuscular blocking
agent used to temporarily freeze muscles during surgery or mechanical
ventilation and to assist in the intubation process. Although
pancuronium is an older drug, doctors continue to use it because it is
an effective and inexpensive product with a known side-effect profile.
The market for pancuronium in the United States is approximately $2
million.
Pancuronium is a small and highly concentrated market. Baxter,
Wyeth and Abbott are the only suppliers of generic injectable
pancuronium in the United States. Currently, Baxter, which markets
pancuronium pursuant to an exclusive

[[Page 1064]]

agreement with GensiaSicor, accounts for almost half of U.S. sales of
the drug. Post-acquisition, Baxter would account for 74% of the sales
of pancuronium in the United States, and the post-acquisition
Herfindahl-Hirschman Index (``HHI'') would be 6,152 points,
representing a 2,496 point increase in the HHI. Post-acquisition,
Abbott would be the only other supplier of pancuronium in the United
States.
The market for the manufacture and sale of pancuronium is unlikely
to attract new entrants because pancuronium is an older drug whose
usage and price have declined over time. Although pancuronium is still
an important drug, companies are unlikely to devote resources to
developing an older drug with limited sales. Even if a supplier of
other injectable drugs decided to develop pancuronium, it would be
costly and time consuming to complete the necessary research and
development, and to obtain the requisite approval from the FDA.
Consequently, entry into the pancuronium market is not likely to occur
in a timely manner, if at all.
The proposed acquisition would create a duopoly in the market for
the manufacture and sale of pancuronium in the United States. Post-
acquisition, Baxter and Abbott would be the only remaining suppliers of
pancuronium. This is likely to lead to higher prices of pancuronium.
The proposed Consent Agreement preserves competition in the
pancuronium market by requiring Baxter to terminate all of its rights
and interests in GensiaSicor's pancuronium product and divest all of
its pancuronium assets to GensiaSicor no later than five days after the
acquisition. GensiaSicor is capable of marketing and selling its own
pancuronium. It is a well recognized and respected company in the
injectable pharmaceutical industry, and will be an able competitor in
the market for the manufacture and sale of pancuronium.

Vecuronium

Vecuronium is an intermediate-acting neuromuscular blocking agent
that temporarily freezes muscles during surgery, mechanical
ventilation, or intubation. Vecuronium is a popular neuromuscular
blocking agent with a superior side effect profile. The market for the
manufacture and sale of vecuronium in the United States is
approximately $21 million.
The market for the manufacture and sale of vecuronium is highly
concentrated. Baxter markets vecuronium under an exclusive supply
agreement with GensiaSicor. Baxter and Wyeth were the two leading
suppliers of vecuronium in the United States, with a combined market
share of 53%, until Wyeth temporarily suspended its vecuronium
production in 2001. Prior to the announcement of the acquisition, Wyeth
planned to re-enter the vecuronium market in the near future. Post-
acquisition, the HHI would be 3,598 points, representing a 1,364 point
increase in the HHI. There are only three other suppliers of vecuronium
in the United States. Organon continues to market its branded
vecuronium, and Abbott and Bedford supply generic vecuronium products.
Entry into the market for the manufacture and sale of vecuronium is
unlikely because it is an older drug with established suppliers, and it
is a difficult drug to manufacture. Although vecuronium continues to be
an important drug, companies are unlikely to devote resources to
entering this market because existing suppliers have become entrenched,
making it difficult for new entrants to capture meaningful market
share. In addition, vecuronium is a complicated drug to manufacture.
Because of the unique manufacturing process involved in making
vecuronium, entry would take longer than two years and cost hundreds of
thousands of dollars.
The proposed acquisition is likely to result in anticompetitive
harm in the U.S. market for the manufacture and sale of vecuronium.
Absent the proposed acquisition, Wyeth would have re-entered this
market. By acquiring Wyeth's vecuronium, Baxter would likely delay or
forego the re-launch of Wyeth's vecuronium and eliminate any associated
price competition.
The proposed Consent Agreement preserves future competition in the
market for vecuronium by requiring Baxter to terminate all of its
rights and interests in GensiaSicor's vecuronium product and divest all
of its vecuronium assets to GensiaSicor no later than five days after
the acquisition.

Metoclopramide

Metoclopramide is an antiemetic used for the prevention and
treatment of nausea and vomiting for patients undergoing certain types
of chemotherapy and for post-operative treatment. Metoclopramide is an
older antiemetic that continues to be used because it is effective, has
a known safety profile, and is considerably cheaper than newer
antiemetics. Annual U.S. sales of metoclopramide total approximately
$13 million.
The market for metoclopramide is highly concentrated. Wyeth
developed the branded metoclopramide product, Reglan[reg]. Baxter is
the exclusive supplier of GensiaSicor's metoclopramide product. Wyeth
and Baxter together represent over half of the sales of metoclopramide
in the United States. Post-acquisition, the HHI would be 3,852 points,
an increase of 936 points above the pre-Acquisition HHI. Only two other
companies supply metoclopramide in the United States: Abbott and
Faulding.
New entry into the market for the manufacture and sale of
metoclopramide is difficult, expensive and unlikely to occur.
Metoclopramide is an older drug with small sales relative to newer
injectable anti-emetics. Therefore, firms do not consider the market
for the manufacture and sale of metoclopramide to be an attractive
entry opportunity. Several manufacturers have already exited the market
and none are interested in re-entering. Even if firms that have exited
were interested in re-launching their drugs, re-entry would likely take
such firms an estimated two years or more.
The proposed acquisition would cause significant anticompetitive
harm in the U.S. market for the manufacture and sale of metoclopramide
by reducing the number of suppliers from four to three. The combined
entity would account for over half of all sales of metoclopramide in
the United States. The proposed acquisition is likely to lead to higher
prices.
The proposed Consent Agreement preserves competition in the
metoclopramide market by requiring Baxter to terminate all of its
interests in GensiaSicor's metoclopramide and divest all of its
metoclopramide assets to GensiaSicor no later than five days after the
acquisition.

New Injectable Iron Replacement Therapies

NIIRTs are used to treat iron deficiency in patients undergoing
hemodialysis. NIIRTs include both injectable iron gluconate and iron
sucrose. Annual U.S. sales of NIIRTs total approximately $225 million.
The market for the manufacture and sale of NIIRTs is highly
concentrated. Watson markets Ferrlecit[reg], the only injectable iron
gluconate product available in the United States. American Regent
markets Venofer[reg], the only injectable iron sucrose product in the
United States. Watson recently entered into a co-promotional agreement
with Baxter, pursuant to which Baxter promotes Ferrlecit[reg].
Entry into the market for the manufacture and sale of NIIRTs is
very difficult and time consuming. Because

[[Page 1065]]

of FDA-imposed New Chemical Entity exclusivity periods, the earliest
that any company could file for regulatory approval of a generic iron
gluconate product is February 2004. Similar provisions protect iron
sucrose, though its exclusivity period expires in November 2003. Entry
into the market for the manufacture and sale of NIIRTs is further
complicated by a lack of raw material suppliers. Even if a new entrant
were to locate a raw material supplier, both iron gluconate and iron
sucrose are difficult products that would take more than two years to
develop. Wyeth is the best-positioned firm to successfully develop a
NIIRT product.
The proposed acquisition is likely to have anticompetitive effects
in the market for the manufacture and sale of NIIRTs in the United
States because it would eliminate potential competition between Baxter
and Wyeth. The proposed acquisition would remove Wyeth as the best-
positioned independent entrant into this market and prevent all
associated price competition.
The proposed Consent Agreement preserves future competition in the
market for the manufacture and sale of NIIRTs by requiring Baxter to
terminate its co-marketing agreement with Watson within weeks of the
expiration of Ferrlicit[reg]'s New Chemical Entity exclusivity. This
termination provides an incentive for Baxter to continue developing and
ultimately launch the iron gluconate product that it will acquire from
Wyeth.
Pursuant to the terms of the Order, the Commission has appointed
William E. Hall as a Monitor Trustee to ensure Baxter's and Wyeth's
compliance with all of the requirements of the Order. Mr. Hall has over
30 years of experience in the pharmaceutical industry and is well-
respected in the industry. In order to ensure that the Commission
remains informed about the status of the proposed divestitures and the
transfers of assets, the Consent Agreement requires Baxter and Wyeth to
file reports with the Commission periodically until the divestitures
are accomplished.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.

By direction of the Commission.
C. Landis Plummer,
Acting Secretary.
[FR Doc. 03-309 Filed 1-7-03; 8:45 am]

BILLING CODE 6750-01-P