FTC Challenges Thoratec's Proposed Acquisition of HeartWare International

The Federal Trade Commission has authorized a lawsuit to block Thoratec Corporation’s proposed $282 million acquisition of rival medical device maker HeartWare International, Inc., charging that the transaction would substantially reduce competition in the U.S. market for left ventricular devices (LVADs), a life-sustaining treatment for patients with advanced heart failure. Thoratec currently has a monopoly on the commercial sale of LVADs in the United States, and the FTC’s administrative complaint alleges that Thoratec seeks to maintain its monopoly by acquiring HeartWare, thus eliminating the only significant threat to Thoratec’s continued dominance of the LVAD market.

The Commission will seek a preliminary injunction in federal district court to stop the transaction and limit the harm to competition, pending completion of the administrative trial.

“We can’t have health care reform that truly benefits American consumers unless we have competition, and competition is particularly important when it comes to life-saving devices such as the LVAD,” said FTC Bureau of Competition Director Richard Feinstein. “We need competition and innovation in these critical cardiac devices – not monopoly. By stopping the acquisition, the Commission’s action will ensure that consumers have a choice of innovative products at lower prices for these critical cardiac devices.”

LVADs are surgically-implantable miniaturized blood pumps designed to support and sustain patients suffering from end-stage heart failure, typically a fatal condition. LVADs provide full circulatory support by assuming the work of the left ventricle, the heart’s primary pumping chamber. End-stage heart failure patients have severely weakened hearts, and the only curative treatment is a heart transplant. LVADs provide temporary support for end-stage heart failure patients awaiting a donor heart and may function as a permanent therapy for patients ineligible to receive a heart transplant.

Thoratec, based in Pleasanton, California, is the world’s leading supplier of LVADs. Thoratec’s flagship product, the HeartMate II, and its first-generation LVAD, the HeartMate XVE, are the only LVADs currently on the market that is approved for commercial sale by the FDA. Under a February 12, 2009, merger agreement Thoratec proposes to acquire all of the outstanding voting securities of HeartWare in a transaction valued at approximately $282 million.

HeartWare, headquartered in Framingham, Massachusetts, is one of a small number of companies developing LVADs. HeartWare’s device, the HVAD, is currently being used by patients participating in clinical trials and is positioned to be the next LVAD approved by the FDA. It offers a novel design that promises superior reliability with fewer surgical complications and is poised to be the first and most significant competitive threat to Thoratec’s LVADs when it gains FDA approval, as expected, by 2012. The few other companies developing LVADs are significantly behind HeartWare in their clinical trials, and none of these LVADs is likely to reach the market as soon as or be as competitive as the HVAD.

The Commission’s administrative complaint charges that Thoratec’s proposed acquisition of HeartWare would be anticompetitive and violate federal antitrust laws. The complaint alleges that Thoratec is willfully attempting to monopolize and conspiring to maintain its monopoly in the U.S. LVAD market, thereby denying patients the potentially life-saving benefits of competition between Thoratec and HeartWare. Competition from HeartWare has already forced Thoratec to innovate even though the HVAD is still in clinical trials, according to the complaint. This competition will intensify once HeartWare’s HVAD receives FDA approval, resulting in lower prices and enhanced features that will increase the availability and quality of these life-saving devices.

The three-count complaint charges Thoratec with: 1) substantially lessening competition in violation of Section 7 of the Clayton Act; 2) illegally attempting and conspiring to maintain its monopoly; and 3) engaging in unfair methods of competition in violation of Section 5 of the FTC Act. It also notifies the parties that the administrative complaint seeking to stop the transaction will be heard on December 28, 2009.

The Commission votes approving the filing of the administrative and federal district court complaints were 4-0.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.

Copies of the public versions of the Commission’s complaints will be available soon from the FTC’s Web site 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@ftc.gov, or write to the Office of Policy and Coordination, Room 383, 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” at http://www.ftc.gov/competitioncounts.

(FTC File No. 091-0064)
(Thoratec.final.wpd)