FTC Approves Prestige Brands Holdings Acquisition of Insight Pharmaceuticals With Conditions

On August 28, 2014, Pharmaceutical company Prestige Brands Holdings, Inc. (“Prestige”), the maker of Dramamine, agreed to divest assets and marketing rights for the over-the-counter (“OTC”) motion sickness drug Bonine to settle Federal Trade Commission (“FTC”) charges that Prestige’s proposed acquisition of Insight Pharmaceuticals Corporation (“Insight”) would likely be anticompetitive.  Prestige proposed to acquire Insight for $750 million, under an agreement dated April 25, 2014.

Motion sickness is a condition in which a disagreement exists between visually perceived movement and the balance center of the inner ear’s sense of movement. For example, a passenger on a ship might experience motion sickness if the inner ear senses the motion of waves, but the passenger’s eyes do not see any movement. The most common symptoms of motion sickness are dizziness, fatigue, and nausea. Insight’s Bonine is one of two major branded products in the market for OTC motion-sickness drugs. Prestige’s Dramamine is the other major branded product in the market. Private label OTC motion sickness products have significant sales, but private label OTC products have only a limited competitive impact in the market because they are usually priced at a fixed discount to branded OTC motion sickness medication products.  Plus, private label products are not typically promoted or marketed. Market entry is also not likely to mitigate the anticompetitive effects of the merger, since the cost of marketing a new branded drug is too large given the small market of the OTC motion-sickness drugs. Therefore, the FTC alleged that competition for OTC motion-sickness drugs would be lessened and harmed, absent remedies, resulting in higher prices for consumers.

To resolve the FTC’s concerns that the transaction would lead to higher prices for OTC motion sickness drugs, the FTC’s proposed settlement with Prestige requires the company to divest Bonine to Wellspring Pharmaceuticals (“Wellspring”) within 10 days after the acquisition takes place. The FTC believes Wellspring is well-suited to acquire the Bonine assets because of its current presence in other OTC retail markets. Wellspring produces and markets a portfolio of OTC brands, including anti-nausea products, skin creams, hygiene products, and potassium supplements, which are widely distributed throughout the United States and Canada. In addition, WellSpring is a contract manufacturing organization serving well-known U.S. pharmaceutical companies while also manufacturing many of its own products at its plant in Oakville, Ontario, Canada. Because Wellspring will step into Insight’s existing contract manufacturing relationship for the production of Bonine, no transfer of manufacturing will be necessary for the proposed divestiture and Wellspring will be able to compete immediately in the OTC motion sickness medications market.

The Commission vote to accept the proposed consent order for public comment was 5-0. The agreement will be subject to public comment for 30 days, beginning on August 31, 2014 and continuing through September 29, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

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

Mark Ye
202-589-1834
mye@dbmlawgroup.com