OVERVIEW OF FTC ANTITRUST ACTIONS IN PHARMACEUTICAL SERVICES AND PRODUCTS Health Care Division Bureau of Competition Federal Trade Commission Washington D.C. 20580 Markus H. Meier Assistant Director Bradley S. Albert Deputy Assistant Director Saralisa C. Brau Deputy Assistant Director September 2009 TABLE OF CONTENTS Page I. INTRODUCTION. ........................................................... 1 II. CONDUCT INVOLVING PHARMACEUTICAL SERVICES AND PRODUCTS. 3 A. Monopolization. ...................................................... 3 B. Agreements Not to Compete. ............................................ 8 C. Agreements on Price or Price-Related Terms. 14 D. Agreements to Obstruct Innovative Forms of Health Care Delivery or Financing. 20 E. Illegal Tying and Other Arrangements. .................................... 20 III. PHARMACEUTICAL MERGERS. ........................................... 20 A. Horizontal Mergers Between Direct Competitors. 20 B. Potential Competition Mergers. ......................................... 44 C. Innovation Market Mergers. ............................................ 47 D. Vertical Mergers...................................................... 49 IV. INDUSTRY GUIDANCE STATEMENTS...................................... 50 A. Advisory Opinions. ................................................... 50 B. Citizen Petition to the Food and Drug Administration. 51 V. AMICUS BRIEFS. ......................................................... 51 VI. INDICES. ............................................................. 54 A. Table of Cases. ...................................................... 54 B. Table of Briefs. ...................................................... 63 FTC ANTITRUST ACTIONS IN PHARMACEUTICAL SERVICES AND PRODUCTS1 I. INTRODUCTION The Federal Trade Commission is a law enforcement agency charged by Congress with protecting the public against anticompetitive behavior and deceptive and unfair trade practices. The FTC’s antitrust arm, the Bureau of Competition, is responsible for investigating and prosecuting “unfair methods of competition” which violate the FTC Act. The FTC shares with the Department of Justice responsibility for prosecuting violations of the Clayton Act. When litigation becomes necessary, many of the FTC’s adjudicative matters are conducted in administrative adjudication before an FTC Administrative Law Judge. This provides the opportunity for matters raising complex legal and economic issues to be heard, in the first instance, in a forum specially suited for dealing with such matters. Appeals from Commission decisions are taken directly to the federal courts of appeal. The Commission also has the authority to seek a preliminary injunction in federal district court whenever the Commission has reason to believe that a party is violating, or is about to violate, any provision of law enforced by the FTC. Such preliminary injunctions are intended to preserve the status quo, or to prevent further consumer harm, pending administrative adjudication before the Commission. Additionally, the Commission has the authority to seek a permanent injunction in federal district court in a “proper case” pursuant to section 13(b) of the FTC Act. In the mid-1970's, the FTC formed a division within the Bureau of Competition to investigate potential antitrust violations involving health care. The Health Care Division consists of approximately thirty-five lawyers and investigators who work exclusively on health care and pharmaceutical antitrust matters. Health Care Division staff also work with staff in the FTC’s seven regional offices on pharmaceutical matters. Non-merger matters involving the pharmaceutical industry are investigated by the Health Care Division staff. Mergers in the pharmaceutical industry are investigated by the Mergers I Division. FTC cases involving pharmaceutical services and products are summarized below.2 The Commission and its staff have also responded to numerous requests for guidance from health care industry participants through, among other things, the advisory opinion letter process, and through the issuance of 1 This summary has been prepared by the FTC Health Care Division staff, and has not been reviewed or approved by the Commission or the Bureau of Competition. Section III describes FTC enforcement involving mergers in the pharmaceutical industry, which are primarily conducted by the Mergers I Division of the Bureau of Competition. 2 Commission complaints and orders issued since March, 1996, are available at the FTC’s web site at http://www.ftc.gov/bc/healthcare/antitrust/commissionactions.htm. 1 statements on enforcement policy.3 Although the statements on enforcement policy are more specifically focused on collaborative actions by physicians and hospitals, the basic principles of these statements on enforcement policy can be instructive to the pharmaceutical industry as well.4 For further information about matters handled by the FTC’s Health Care Division, or to lodge complaints about suspected antitrust violations, please write, call, or fax this office as follows: Mailing Address: Health Care Division Bureau of Competition Federal Trade Commission Washington, DC 20580 Telephone Number: 202-326-2756 Fax Number: 202-326-3384 For further information about pharmaceutical mergers handled by the FTC’s Mergers I Division, please write, call, or fax the Mergers I Division as follows: Mailing Address: Mergers I Division Bureau of Competition Federal Trade Commission Washington, DC 20580 Telephone Number: 202-326-2682 Fax Number: 202-326-2655 3 Information regarding advisory opinions is set forth in the Topic and Yearly Indices of Health Care Advisory Opinions by Commission and by Staff. The indices, the advisory opinions, and other information relating to the Commission’s advisory opinion program are also available at the FTC’s web site at http://www.ftc.gov/bc/healthcare/industryguide/advisory.htm. 4Statements of Antitrust Enforcement Policy in Health Care, issued on August 28, 1996, 4 Trade Reg. Rep. (CCH) ¶13,153; Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust, issued on September 27, 1994, 4 Trade Reg. Rep. (CCH) ¶13,152; and Department of Justice and Federal Trade Commission Antitrust Enforcement Policy Statements in the Health Care Area, issued on September 15, 1993, 4 Trade Reg. Rep. (CCH) ¶13,151. The 1996 Policy Statements are available at http://www.ftc.gov/bc/healthcare/industryguide/policy/index.htm. 2 II. CONDUCT INVOLVING PHARMACEUTICAL SERVICES AND PRODUCTS A. Monopolization CSL Limited and Cerberus-Plasma Holdings, LLC, D. 9337, FTC File No. 0812255 (administrative complaint issued May 27, 2009) (http://www.ftc.gov/os/adjpro/d9337/index.shtm); Case No. 09-cv-1000-CKK (D.D.C. May 29, 2009) (motion for preliminary injunction filed) (http://www.ftc.gov/os/caselist/0810225/index.shtm); (CSL announced that it will not proceed with the proposed acquisition, June 8, 2009) (http://www.ftc.gov/opa/2009/06/csl.shtm). The complaint seeks to block CSL Limited’s proposed $3.1 billion acquisition of Talecris Biotherapeutics Holdings Corp. (a wholly owned subsidiary of Cerberus-Plasma Holdings, LLC). (The Commission also sought a preliminary injunction in federal court, to halt the transaction pending the outcome of the administrative trial.) The complaint charges that the proposed acquisition would substantially lessen competition in the U.S. markets for four plasma-derivative protein therapies: Immune globulin (Ig); Albumin; Alpha-1; and Rho-D. The complaint further alleges that the effect will be further tightening of supply relative to demand and steeper price increases – potentially depriving critically ill patients of needed treatments (which can cost more than $90,000 annually per patient). CSL is the world’s second-largest supplier of plasma-derivative protein therapies. CSL owns and operates more than 70 plasma collection facilities in the U.S. and Germany, and three manufacturing facilities in Europe and the U.S. Talecris is the world’s third-largest producer of plasma-derivative protein therapies. Like CSL, Talecris owns a number of plasma collection centers, as well as two manufacturing facilities, in the U.S. The complaint states that the plasma- derivatives products industry has become much more concentrated since 1990 (from 13 firms to five), and has resulted in an oligopolistic industry wherein competition has been greatly curtailed. The complaint charges that the proposed acquisition would have further anticompetitive effects in each of the following markets: # Ig and Albumin. Ig is a widely-prescribed drug, used most commonly to treat primary immunodeficiency diseases and certain neurological conditions. IVIG, the predominant form of Ig, has over 20 FDA-approved indications, and as many as 150 off- label uses. Albumin is used as a blood volume expander and to prime heart valves during surgery. There are no good substitutes for Ig or Albumin. The acquisition would decrease the number of firms in these markets from five to four (with two of the remaining firms being too small to have a significant market impact). In each market, following the proposed acquisition, the combined firm would control nearly 50 percent of the market. Moreover, Talecris has been a unique competitive restraint in these markets, and so its elimination would be particularly detrimental to competition. The acquisition would substantially lessen competition by enabling the remaining firms in these markets to engage more completely