FTC Puts Conditions on Pharmaceutical Joint Venture Between GlaxoSmithKline and Novartis

Global pharmaceutical company Novartis AG has 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. GSK currently sells its own nicotine replacement patch, Nicoderm CQ.

London-based GSK and Switzerland-based Novartis each manufacture and market a range of consumer health care products in the United States, including toothpaste, cold-and-flu remedies, indigestion remedies, skin care aids, and smoking cessation products.

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, which had U.S. sales of more than $58 million in 2013.        

Consumers use nicotine patches to reduce their nicotine intake gradually while quitting smoking. According to the FTC’s complaint, Novartis and GSK are the only companies that market branded nicotine patches in the United States, and two of only three companies that supply private label patches to retailers. 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.

Potential competitors would find it difficult, expensive, and time-consuming to develop new patch products and secure FDA approval, reinforcing the substantial competitive concerns. To preserve competition in the market for nicotine patches, the proposed consent order requires Novartis to divest Habitrol, as well as its private-label patch business to India-based Dr. Reddy’s, one of the largest sellers of private-label over-the-counter health products to the U.S. market.

More information about the FTC’s consent agreement can be found in the analysis to aid public comment.

The Commission vote to accept the complaint and proposed consent order for public comment was 5-0.

The FTC will publish 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 December 29, 2014, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed 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 per day.

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, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. 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.