FTC Agreement with American Home Products Corp. Would Protect Consumers from Anticompetitive Practices

The Federal Trade Commission today announced a consent agreement with American Home Products Corporation (AHP) that would settle charges that the company entered into an anticompetitive agreement with Schering-Plough Corporation (Schering) to delay entry of a lower-cost generic drug into the U.S. market. The Commission's administrative complaint alleged that Schering, the maker of K-Dur 20, a widely prescribed potassium chloride supplement, illegally paid AHP millions of dollars in exchange for AHP's agreement to delay the sale of its generic K-Dur 20 product. Today's settlement prohibits several types of potentially anticompetitive agreements between AHP and other drug companies, and requires AHP to notify the Commission before entering into some other types of agreements in the future.

"This marks the third instance in which the Commission has reached a settlement with generic or branded drug manufacturers regarding alleged anticompetitive behavior designed to delay generic entry," said Joseph Simons, Director of the FTC's Bureau of Competition. "In each case, the FTC has secured agreements that such behavior will not be repeated in the future, protecting consumers from the high costs associated with the delayed entry of lower-priced alternatives to brand-name drugs."

In April 2001, the FTC filed a complaint against Schering, Upsher-Smith Laboratories (Upsher-Smith), and AHP that challenged two separate agreements entered into between Schering and Upsher-Smith and between Schering and AHP. Only AHP entered into a consent agreement with the Commission. The case against Schering (challenging both agreements) and Upsher-Smith is currently being heard before an administrative law judge at the Commission.

The Commission's complaint and the proposed order are described in more detail in the Analysis to Aid Public Comment that also was made public today. The proposed consent order is designed to remedy AHP's alleged anticompetitive behavior and prevent recurrence of that behavior in the future. Among other things, the proposed order prohibits AHP, acting either as a generic entrant or as a brand-name manufacturer, from entering into two categories of agreements:

1. agreements in which the brand-name company makes payments to the generic entrant and the generic agrees not to market its product for some period of time (except in certain limited circumstances); and
2. agreements between the brand-name company and a generic entrant in which the generic agrees not to enter the market with a generic product that is not subject to a claim of patent infringement.

The proposed order also details the form of notice that AHP must provide to the Commission before entering into some kinds of proposed agreements, and contains specific reporting and other provisions designed to ensure the company's compliance with its terms.

The proposed order would expire in 10 years.

The Commission vote to approve the consent agreement for public comment was 4-0, with Chairman Timothy J. Muris not participating. The proposed agreement will be published in the Federal Register shortly and will be subject to public comment for 30 days, until March 15, 2002, after which the Commission will decide whether to make it final. Comments should be sent to: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580.

NOTE: A consent agreement 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 $11,000.

Copies of the complaint, proposed consent agreement and an analysis to aid public comment are available from the FTC Web site at www.ftc.gov. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC Docket No. 9297)