Legal Library: Cases and Proceedings

Global pharmaceutical company Novartis AG agreed to divest Habitrol, its nicotine replacement therapy patch, to settle FTC charges that its consumer health care products joint venture with GlaxoSmithKline (GSK) would likely be anticompetitive. Under the terms of the proposed joint venture agreement, GSK will control the joint venture and contribute, among other products, its nicotine patch business. Novartis will have a 36.5 percent interest in the joint venture, and without the divestitures required by the proposed order, would continue to own the Habitrol business. According to the complaint, without the divestiture contained in the proposed settlement, Novartis’s ownership of both Habitrol and a substantial interest in the joint venture that sells GSK’s nicotine patches would substantially reduce competition and lead to higher prices for Habitrol and Novartis’s private-label patches.  (C-4498)

Separately, Novartis AG also agreed to divest all assets related to its BRAF and MEK inhibitor drugs, products in development, to Boulder, Colorado-based Array BioPharma to settle FTC charges that Novartis’s $16 billion acquisition of GlaxoSmithKline’s portfolio of cancer-treatment drugs would likely be anticompetitive. According to the complaint, the Switzerland-based Novartis and the London-based GSK are two of a small number of companies with either a BRAF or MEK inhibitor currently on the market or in development, and two of only three companies marketing or developing a BRAF/MEK combination product to treat melanoma. If the acquisition goes forward as proposed, Novartis would likely delay or terminate development of both its BRAF and MEK inhibitors, as well as the combination product. Under the terms of the consent agreement, Novartis is required to provide transitional services to Array BioPharma to ensure that development of the BRAF and MEK inhibitors continues uninterrupted and that competition in BRAF and MEK inhibitor markets is not reduced. (C-4510)

Pharmaceutical companies Sun Pharmaceutical Industries Ltd. and Ranbaxy Laboratories Ltd. agreed to divest Ranbaxy’s interests in generic minocycline tablets in order to settle FTC charges that Sun’s $4 billion proposed acquisition of Ranbaxy would likely be anticompetitive. Torrent Pharmaceuticals Ltd., a global drug company based in India that markets generic drugs in the United States, will acquire the divested assets. Under the settlement, Sun and Ranbaxy must also sell Ranbaxy’s generic minocycline capsule assets to Torrent, to enable Torrent to achieve regulatory approval for a change in ingredient suppliers for its minocycline tablets as quickly as Ranbaxy would have been able to do in the absence of the deal. In addition, Sun and Ranbaxy must supply generic minocycline tablets and capsules to Torrent until the company establishes its own manufacturing infrastructure.

Eli Lilly and Company agreed to divest its Sentinel product line of medications for treating heartworm disease in dogs in order to settle FTC charges that its proposed $5.4 billion acquisition of Novartis Animal Health would likely be anticompetitive. Under the settlement, Eli Lilly will divest its Sentinel product line and associated assets to the French pharmaceutical company, Virbac S.A. The FTC’s complaint challenging the transaction alleges that the proposed acquisition would be anticompetitive and lead to higher prices. According to the complaint, Eli Lilly’s Trifexis and Novartis Animal Health’s Sentinel products are particularly close substitutes because they are the only two products that are given orally once a month, contain the same active ingredient, and also treat fleas and other internal parasites in dogs.

Under a proposed settlement, CHS will sell the Riverview Regional Medical Center and all of its associated operations and businesses near Gadsden, Alabama, and the Carolina Pines Regional Medical Center and of its associated operations and businesses near Hartsville, South Carolina, to Commission-approved buyers within six months after the order is issued. The divestitures resolve Commission charges that the combination would likely substantially lessen competition for general acute care (GAC) inpatient services sold to commercial health plans and provided to commercially insured patients in two local markets: 1) Etowah County, including the city of Gadsden, Alabama; and 2) Darlington County, South Carolina.  Absent relief, CHS’s acquisition of HMA would eliminate valuable price and quality competition that has benefitted local patients in these two markets.

An association representing skating teachers agreed to eliminate provisions in its bylaws that the FTC alleged limit competition among the association’s members. In its complaint, the FTC charged that the Professional Skaters Association, through its code of ethics, broadly bans members from soliciting other members’ students, and thereby deprives consumers of the benefits of competition among the 6,400 ice skating teachers and coaches who are members. According to the complaint, the PSA instructed its members that this code provision prohibited coaches from many types of direct and indirect communications with skaters and parents, and actively enforced the ban through a variety of penalties, including suspension, even over the objections of skating students and their parents who wanted to switch coaches. The consent order settling the FTC’s charges requires the Professional Skaters Association to stop restraining its members from soliciting work and competing on the basis of price. It also requires the group to change its code of ethics, publicize its settlement with the FTC, and implement an antitrust compliance program.

An association representing electricians agreed to eliminate provisions in its bylaws that the FTC charged limit competition among each association’s members. The FTC alleged that the purpose and effect of the association's bylaws has been to restrain competition by discouraging and restricting competition among PLASMA members. The consent order settling the FTC’s charges requires PLASMA to revise its bylaws, publicize its settlement with the FTC, and implement an antitrust compliance program.

The FTC required Surgery Center Holdings, Inc., known as Surgery Partners, and Symbion Holdings Corporation, to divest Symbion’s ownership interest in an ambulatory surgery center in Orange City, Florida to Dr. Mark W. Hollmann, as part of a settlement resolving charges that Surgery Partners’ $792 million purchase of Symbion would be anticompetitive. Both companies operate a large number of ambulatory surgery centers located throughout the country that sell and provide outpatient surgical services to commercial health plans and commercially insured patients. The proposed merger would have combined the only two multi-specialty ambulatory surgical centers in the Orange City/Deltona area of Florida, and would have left commercial health plans and commercially insured patients there with only one meaningful alternative to Surgery Partners’ outpatient surgical services.

The Commission challenged Schering-Plough’s proposed $41.4 billion acquisition of Merck & Co., and required divestitures to preserve competition in markets for human and animal pharmaceuticals. The proposed consent order requires that Merck sell its interest in Merial Limited, an animal health joint venture with Sanofi-Aventis S.A., and that Schering-Plough sell its assets related to significant drugs for nausea and vomiting in humans.

Global medical technology company Medtronic, Inc. agreed to divest the drug-coated balloon catheter business of Ireland-based medical products company Covidien plc, in order to settle FTC charges that its $42.9 billion acquisition of Covidien would likely be anticompetitive. Under the FTC’s proposed settlement, Medtronic will sell the drug-coated balloon catheter business to a Colorado-based medical device company, The Spectranetics Corporation. According to the FTC’s complaint, both Medtronic and Covidien are developing drug-coated balloon catheters to compete with C.R. Bard, Inc., which currently is the only company that supplies these products, used to treat peripheral artery disease, in the U.S. market. Medtronic and Covidien are the only companies with products in clinical trials in the Food and Drug Administration’s approval process, which makes it unlikely that other competitors could enter the market in time to counteract the effects of the merger.

According to the FTC's complaint, Bi-Lo’s proposed $265 million acquisition of the Delhaize supermarkets would likely harm consumers through higher grocery prices, diminished quality and reduced service levels in 11 local markets in three states. The consent order requires the merged Bi-Lo/Delhaize to sell 12 stores to Rowes IGA Supermarkets, HAC, Inc., W. Lee Flowers & Co., Inc. and Food Giant. Under the terms of the purchase agreement, Bi-Lo will acquire the Delhaize stores on a rolling basis, through eight separate deal closings over a 10-week period. Each supermarket divestiture must be completed within 10 days of the respective Bi-Lo/Delhaize closing date. The FTC settlement preserves supermarket competition in 11 local markets in three states.

Service Corporation International (SCI), the nation’s largest provider of funeral and cemetery services,agreed to sell 53 funeral homes and 38 cemeteries to resolve FTC charges that its proposed $1.4 billion acquisition of Stewart Enterprises, Inc. (Stewart) is likely to substantially lessen competition in 59 communities throughout the United States. The FTC complaint alleges the deal as proposed would eliminate direct competition between the two firms. The FTC charges that the proposed deal would enable the merged firm unilaterally to raise prices charged to consumers in these local markets and would substantially increase the risk of collusion between SCI and the few remaining competitors in the affected local areas. The proposed order settling the FTC’s charges requires SCI and Stewart to sell the 53 funeral homes and 38 cemeteries to Commission-approved buyers within 180 days, and also requires SCI and Stewart to sell certain related assets and property needed to ensure that the buyers will be able to fully replicate the competition that would have been lost if the transaction were completed as proposed.