FTC Approves Generic Pharmaceutical Mergers With Divestitures

On July 27, 2016, the Federal Trade Commission (“FTC”) cleared to generic pharmaceutical deals.

Mylan/Meda Deal

Mylan, N.V. agreed to divest the rights and assets related to two generic products to settle allegations that its proposed $7.2 billion acquisition of Meda AB would be anticompetitive.  Under the terms of the settlement agreement, Alvogen Pharma US, Inc. will acquire the rights and assets related to 400 mg and 600 mg felbamate tablets (used to treat refractory epilepsy) from Mylan, and Mylan must also relinquish its U.S. marketing rights for 250 mg carisoprodol tablets (used to treat muscle spasms and stiffness) to allow Indicus Pharma LLC to compete in the U.S. market.  See FTC Press Release.

Teva-Allergan Deal

On July 27, 2016, the FTC announced that Teva Pharmaceutical Industries Ltd. agreed to settle charges that its proposed $40.5 billion acquisition of Allergan plc’s generic pharmaceutical business would substantially reduce competition in markets for several pharmaceutical products where the companies currently compete or would likely have competed in the future.  See Press Release.

According to the settlement, Teva is required to divest a portfolio of 79 pharmaceutical products to eleven firms.  This divestiture package is the largest pharmaceutical divestiture ever negotiated with the FTC.  Companies that will acquire the divested products include Mayne Pharma Group, Impax Laboratories, Dr. Reddy’s Laboratories, Sagent Pharmaceuticals, Cipla Limited, Zydus Worldwide, Mikah Pharma, Perrigo Pharma International, Aurobindo Pharma USA, Prasco and 3M Co. Teva and Allergan must divest the drugs within 10 days after the acquisition.  Teva will divest anesthetics, antibiotics, weight loss drugs, oral contraceptives and drugs meant to treat ADHD, allergies, arthritis, cancers, diabetes, high blood pressure, high cholesterol, mental illnesses, opioid dependence, pain, Parkinson’s disease and respiratory, skin and sleep disorders. The divestitures are designed to preserve competition in markets with Teva and Allergan now compete or would likely have competed in the future.  According to the FTC, the combined companies will have approximately 22% of generic sales in the United States.

The FTC released a statement explaining that, in addition to evaluating individual product overlaps, the Commission also considered the following three potential theories of harm: (1) whether the proposed transaction would likely lead to anticompetitive effects from the bundling of generic products; (2) whether the merger might decrease incentives to challenge the patents of brand-name pharmaceutical companies under the Hatch-Waxman Act; and (3) whether the merger would likely reduce incentives to develop new generic products.  See, Commission Statement.

Lessons Learned

The FTC’s agreements to settle antitrust charges in Mylan/Meda and Teva/Allergan send a message to the generic pharmaceutical industry that the FTC has not changed how it analyzes generic pharmaceutical mergers.  The FTC is willing to allow consolidation as long as it can negotiate divestiture remedies that resolve actual and potential horizontal competitive overlaps.  While the announced divestitures indicate that the FTC stayed the course on how it routinely approves generic pharmaceutical mergers, the Commission’s statement indicates that the FTC did not simply rubber stamp the transaction. Rather, the FTC conducted a thorough investigation analyzing additional theories of harm so in the future the FTC may take more aggressive action if the facts support a case.  But for now, it is business as usual.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com