[Federal Register: July 25, 2005 (Volume 70, Number 141)]
[Notices]
[Page 42548-42550]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy05-44]
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FEDERAL TRADE COMMISSION
[File No. 051 0106]
Novartis AG; Analysis of Agreement Containing Consent Order To
Aid Public Comment
AGENCY: Federal Trade Commission (FTC).
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of Federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before August 18, 2005.
ADDRESSES: Interested parties are invited to submit written comments.
Comments should refer to ``Novartis AG, File No. 051 0106,'' to
facilitate the organization of comments. A comment filed in paper form
should include this reference both in the text and on the envelope, and
should be mailed or delivered to the following address: Federal Trade
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania
Avenue, NW., Washington, DC 20580. Comments containing confidential
material must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper
form be sent by courier or overnight service, if possible, because U.S.
postal mail in the Washington area and at the Commission is subject to
delay due to heightened security precautions. Comments that do not
contain any nonpublic information may instead be filed in electronic
form as part of or as an attachment to e-mail messages directed to the
following e-mail box: consentagreement@ftc.gov.
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See Commission Rule 4.9(c),
16 CFR 4.9(c).
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The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the FTC Web site, to the extent
practicable, at http://www.ftc.gov. As a matter of discretion, the FTC
makes every effort to remove home contact information for individuals
from the public comments it receives before placing those comments
[[Page 42549]]
on the FTC Web site. More information, including routine uses permitted
by the Privacy Act, may be found in the FTC's privacy policy, at http:/_____________________________________-/www.ftc.gov/ftc/privacy.htm
.
FOR FURTHER INFORMATION CONTACT: Elizabeth A. Jex, Bureau of
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202)
326-3273.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 of
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given
that the above-captioned consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for July 19, 2005), on the World Wide Web, at http://www.ftc.gov/os/2005/07/index.htm.
A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington,
DC 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreement Containing Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Order (``Consent
Agreement'') from Novartis AG (``Novartis''), which is designed to
remedy the anticompetitive effects of the acquisition of Eon Labs, Inc.
(``Eon'') by Novartis. Under the terms of the proposed Consent
Agreement, Novartis, including its generic pharmaceuticals division
Sandoz, Inc. (``Sandoz''), would be required to divest to Amide
Pharmaceutical, Inc. (``Amide'') the Eon assets necessary to
manufacture and market generic desipramine hydrochloride tablets, and
the Sandoz assets necessary to manufacture and market orphenadrine
citrate ER tablets and rifampin oral capsules in the United States.
Further, Novartis, through Sandoz, has agreed to enter into a supply
agreement with Amide to enable Amide to market these products until
Amide obtains Food and Drug Administration (``FDA'') approval to
manufacture the products itself. Further, Novartis is required to
provide technology transfer assistance to enable Amide to obtain all
necessary FDA approvals as soon as possible.
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After thirty days, the Commission will again review the proposed
Consent Agreement and the comments received, and will decide whether it
should withdraw from the proposed Consent Agreement, modify it, or make
final the Decision and Order (``Order'').
Pursuant to an Agreement for Purchase and Sale of Stock dated
February 20, 2005, Novartis agreed to purchase 60 million shares of Eon
from Santo Holding AG (``Santo'') for $1.72 billion in cash. These
shares represent approximately 67% of the outstanding stock of Eon.
Further, Novartis has made a definitive agreement, approved by the Eon
Board of Directors, to offer to acquire the remaining 31.9 million
fully diluted shares of Eon for $31.00 per share cash. The Commission's
Complaint alleges that the proposed acquisition, if consummated, would
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and
Section 5 of the FTC Act, as amended, 15 U.S.C. 45, in the markets for
the manufacture and sale of: (1) Generic desipramine hydrochloride
tablets, (2) generic orphenadrine citrate ER tablets, and (3) generic
rifampin oral capsules. The proposed Consent Agreement will remedy the
alleged violations by replacing in each of these markets the lost
competition that would result from the acquisition.
Desipramine hydrochloride is a tricyclic antidepressant. The
branded desipramine product, Norpramin, does not offer any significant
price pressure in the generic desipramine market other than setting a
price ceiling that is currently many times higher than the generic
pricing level. The brand price is essentially irrelevant with respect
to the pricing of generic desipramine tablets. In contrast, the
competition between producers of generic desipramine tablets has a
direct and substantial effect on generic desipramine pricing. Annual
U.S. sales of generic desipramine hydrochloride tablets are reported to
be less than $6 million. The U.S. market for the manufacture and sale
of generic desipramine hydrochloride tablets is highly concentrated.
Only Novartis and Eon make all six strengths of generic desipramine
hydrochloride tablets. Watson Pharmaceuticals, Inc., the only other
firm supplying generic desipramine hydrochloride tablets, sells only
three of the six strengths. The acquisition of Eon by Novartis would
increase significantly the concentration in the generic desipramine
hydrochloride market. Post-acquisition, only Novartis would supply the
full line, accounting for more than 95% of U.S. generic desipramine
hydrochloride sales.
Orphenadrine citrate is a muscle relaxant. The branded orphenadrine
citrate product, Norflex, does not impact the pricing of generic
orphenadrine citrate other than setting a price ceiling that is
currently many times higher than the generic pricing level. In
contrast, the competition between producers of generic orphenadrine
citrate tablets has a direct and substantial effect on generic
orphenadrine citrate pricing. Annual U.S. sales of generic orphenadrine
citrate ER tablets is slightly under $10 million. The U.S. market for
the manufacture and sale of generic orphenadrine citrate ER tablets is
highly concentrated. Only Eon, Novartis, and Impax Laboratories, Inc.
(through its generic marketing division, Global Pharmaceuticals)
manufacture and market generic orphenadrine citrate ER tablets in the
United States. The acquisition would result in a duopoly with Novartis
accounting for approximately 70% of all prescriptions of generic
orphenadrine citrate. The acquisition of Eon by Novartis would increase
the concentration in the market significantly.
Rifampin is one of several drugs used in a multi-drug cocktail for
the treatment of tuberculosis. Rifampin is indicated for the treatment
of tuberculosis. The branded rifampin product, Rifadin, does not offer
any significant price pressure in the generic rifampin oral capsule
market other than setting a price ceiling that is currently many times
higher than the generic pricing level. In contrast, the competition
between producers of generic rifampin capsules has a direct and
substantial effect on generic rifampin pricing. Annual U.S. sales of
generic rifampin oral capsules is about $14.5 million. The U.S. market
for the manufacture and sale of generic rifampin oral capsules is
highly concentrated. Only Eon, Novartis, and VersaPharm, Incorporated
market generic rifampin oral capsules in the United States. The
acquisition would result in a duopoly with Novartis accounting for more
than 70% of sales of generic rifampin in the United States.
[[Page 42550]]
The acquisition of Eon by Novartis would increase the concentration in
the market significantly.
Entry into manufacture and sale of: (1) Generic desipramine
hydrochloride tablets, (2) generic orphenadrine citrate ER tablets, and
(3) generic rifampin oral capsules would not be timely, likely, or
sufficient in its magnitude, character, and scope to deter or
counteract the anticompetitive effects of the acquisition. Developing
and obtaining FDA approval for the manufacture and sale of generic
desipramine hydrochloride tablets, generic orphenadrine citrate ER
tablets, and generic rifampin oral capsules takes at least two years
due to substantial regulatory, technological, and intellectual property
barriers.
The proposed acquisition would cause significant anticompetitive
harm to consumers in the U.S. markets for generic desipramine
hydrochloride tablets, generic orphenadrine citrate ER tablets, and
generic rifampin oral capsules by eliminating actual, direct, and
substantial competition between Novartis and Eon; by increasing the
likelihood that Novartis will be able to unilaterally exercise market
power; by increasing the likelihood and degree of coordinated
interaction between the few remaining competitors; and by increasing
the likelihood that consumers will pay higher prices.
The proposed Consent Agreement preserves competition in the generic
desipramine hydrochloride tablets, generic orphenadrine citrate ER
tablets, and generic rifampin oral capsules markets by requiring that
Novartis divest all of the Sandoz orphenadrine citrate ER and rifampin
assets and all of Eon's desipramine hydrochloride assets to Amide no
later than ten days after the acquisition. Amide, a reputable generic
manufacturer, is particularly well-positioned to manufacture and market
generic rifampin, because Amide already currently contract manufactures
generic rifampin capsules for Novartis. Amide is also well-positioned
to obtain FDA approval to manufacture and market generic desipramine
hydrochloride and orphenadrine citrate ER in the near future. If the
Commission determines that Amide is not an acceptable purchaser, or
that the manner of the divestiture is not acceptable, Novartis must
rescind the transaction with Amide and divest the assets to a
Commission-approved buyer not later than six months from the date the
Order becomes final. If Novartis fails to divest within the six months,
the Commission may appoint a trustee to divest the desipramine
hydrochloride, rifampin, and orphenadrine citrate ER assets.
The proposed remedy contains several provisions designed to ensure
the successful divestiture of the desipramine hydrochloride, rifampin,
and orphenadrine citrate ER assets to Amide. Novartis must provide
various transitional services to enable Amide to compete against
Novartis immediately following the divestiture. Novartis is obligated
to provide Amide with all inventory of the three divested products and
to supply Amide the two products that Amide does not currently
manufacture--desipramine hydrochloride and orphenadrine citrate ER--
while Amide attempts to obtain FDA approval to manufacture the products
for itself in its own facility. Novartis will supply Amide with
desipramine hydrochloride for two years, and Amide will have options to
extend that supply for two additional one-year periods if Amide is
making progress toward approval and needs the additional time to obtain
FDA approval. Novartis will supply Amide with orphenadrine citrate ER
for four years, and Amide will again have options to extend the supply
up to two additional one-year periods as it seeks FDA approval to
manufacture orphenadrine citrate for itself. Novartis is also required
to provide technology transfer assistance to enable Amide to obtain all
necessary FDA approvals to manufacture and sell desipramine
hydrochloride, rifampin, and orphenadrine citrate for itself.
The proposed remedy does not provide for a technology transfer or
supply obligation for rifampin because Amide is already in possession
of the manufacturing technology, having contract manufactured generic
rifampin for Novartis for several years.
The proposed remedy also incorporates the use of an Interim
Trustee, experienced in obtaining regulatory approval and the
manufacture of pharmaceuticals, to oversee the technology transfer and
to assist Amide and the Commission in the event of difficulties with
supply or delays in obtaining approval. As part of the proposed remedy,
Novartis is required to execute an agreement conferring all rights and
powers necessary for the Interim Trustee to satisfy his
responsibilities under the Order to assure successful divestitures of
the desipramine hydrochloride, rifampin, and orphenadrine citrate
assets. Novartis has selected Francis J. Civille to be the Interim
Monitor and Amide has consented to his selection. The monitor will
ensure that the Commission remains informed about the status of the
proposed divestitures and asset transfers.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 05-14548 Filed 7-22-05; 8:45 am]
BILLING CODE 6750-01-P