FTC Challenges Grifols/Talecris Merger as Anticompetitive

The Federal Trade Commission will require Grifols, S.A., a manufacturer of plasma-derived drugs, to make significant divestitures as part of a settlement allowing Grifols to acquire a leading plasma-derived drug manufacturer, Talecris Biotherapeutics Holdings Corp.

The settlement is the latest FTC action taken to preserve competition and protect U.S. consumers from higher health care costs. It resolves FTC charges that Grifols’ proposed acquisition of Talecris would be anticompetitive and would violate federal antitrust laws. As part of the settlement, Grifols will sell the Talecris fractionation facility in Melville, New York, and Grifols’ plasma collection centers in Mobile, Alabama, and Winston-Salem, North Carolina, to Kedrion S.p.A. Kedrion is a manufacturer of plasma-derived products in Europe and other markets, and will be a new entrant in the U.S. plasma-derived products industry. Grifols also will manufacture three plasma-derived products for Kedrion for several years under a manufacturing agreement.

On June 6, 2010, Grifols agreed to acquire Talecris for approximately $3.4 billion in stock and cash. Grifols, headquartered in Barcelona, Spain, develops and manufactures human blood plasma-derived products, with facilities in Barcelona and Los Angeles. Talecris is based in Research Triangle Park, North Carolina, and also specializes in the development, manufacture, and worldwide sale of blood plasma-derived products.

As alleged in the FTC’s complaint, Grifols’ proposed acquisition of Talecris would be anticompetitive and violate federal law by lessening competition in the U.S. markets for three blood plasma-derived products:

• Immune globulin (Ig), which is used to treat, among other things, immune deficiencies and neurological disorders;
• Albumin, which is used to expand blood volume, prime heart valves during cardiac surgery, treat burn victims, and replace proteins in patients suffering from liver failure; and
• Plasma-derived Factor VIII (pdFVIII), which is used to treat bleeding disorders, primarily Hemophilia A and von Willebrand disease.

Each of these products must be approved by the Food and Drug Administration for sale in the United States. The FDA requires that they be made only from plasma collected in the United States and made at FDA-approved plants.

According to the FTC, Grifols and Talecris currently have approximately 8.4 percent and 22.8 percent of the U.S. Ig market, respectively, and their merger would leave only three meaningful manufacturers with nearly all U.S. Ig sales. In the market for albumin, the companies have U.S. market shares of approximately 13 percent each, and the acquisition would leave only four significant competitors. In the market for pdFVIII, Grifols and Talecris have 23 percent and 3.6 percent of the U.S. market, and after their merger there would be only three main competitors.

In its complaint, the FTC alleges that the acquisition of Talecris by Grifols would eliminate direct competition for the products in the three plasma-derived markets. With fewer competitors in the market, those remaining could more easily work together through coordinated interaction to reduce supply and raise prices for consumers.

The FTC’s proposed settlement order is designed to remedy the alleged anticompetitive impacts of the transaction as proposed. It requires Grifols to: 1) sell the fractionation facility Talecris currently owns in Melville, New York, to Kedrion; 2) sell plasma collection centers to Kedrion; 3) sell Talecris’ Koate pdFVIII business, including the Koate brand name in the United States, to Kedrion; and 4) manufacture private-label Ig, private-label albumin, and Koate for seven years for Kedrion to sell in the United States.

The proposed order will expedite the entry of Kedrion as an additional competitor into each of the three blood plasma-derived markets, making a potential industry-wide coordinated plan to raise prices more difficult. Kedrion’s entry will limit he ability of the combined Grifols-Talecris to raise prices. As a significant provider of plasma-derived products outside the United States, Kedrion has the resources and ability to become an effective competitor in the U.S. market. The order’s terms will ensure that Kedrion will have immediate access to these markets and will be able to supply Ig, albumin, and pdFVIII in the United States, adding to the available supply of these life-saving products.

The Commission vote approving the complaint and proposed consent order was 4-0, with Commissioner William E. Kovacic recused and Commissioner Julie Brill issuing a separate concurring statement. The proposed order will be published in the Federal Register subject to public comment for 30 days, until July 1, 2011, after which the Commission will decide whether to make it final. Comments can be submitted electronically here.

In her concurring statement, Commissioner Brill stated that whether to approve the proposed consent is a “close call.” She noted past competition concerns in the industry and their detrimental effects on consumers, including safety-net providers who serve indigent and other at-risk patients. Commissioner Brill further stated: “I expect that the Commission, other federal and state agencies, and affected purchasers will closely monitor these markets” in the future.

NOTE: The Commission issues a 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. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order 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 up to $16,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s website at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. 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{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.

(FTC File No. 101-0153)