FTC Challenges Barr’s Proposed Acquisition of Pliva

On October 20, the Federal Trade Commission announced its decision to challenge Barr Pharmaceutical, Inc.’s proposed acquisition of Pliva for approximately $2.5 billion. The FTC’s complaint alleges that the acquisition as originally structured would have eliminated current or future competition between Barr and Pliva in certain markets for generic pharmaceuticals treating depression, high blood pressure and ruptured blood vessels, and in the market for organ preservation solutions, thereby increasing the likelihood that consumers would pay more for these vital products.
In settling the Commission’s charges, Barr is required to sell its generic antidepressant trazodone and its generic blood pressure medication triamterene/HCTZ. Barr also is required to divest either Pliva’s or Barr’s generic nimodipine for use in treating ruptured blood vessels in the brain. Finally, Barr is required to divest Pliva’s branded organ preservation solution Custodial.

The Commission identified four product markets that likely would experience anticompetitive effects if the proposed acquisition was allowed to proceed unchallenged. Trazodone hydrochloride is an antidepressent sold in several different formulations. There are five suppliers of generic trazodone in the U.S., but not all the suppliers are capable of supplying all formulations. Barr and Pliva are two of only three suppliers of the 150 mg formulation of generic trazodone.

Triamterene/HCTZ is a combination product used to treat high blood pressure. Currently, there are only five suppliers of generic triamterene/HCTZ tablets in the U.S. and several of those suppliers, other than Barr and Pliva, have a more limited competitive presence.

Nimodipine is used to treat symptoms resulting from a ruptured blood vessel in the brain. Although the patent for the branded version of this drug has expired, there are no generic equivalents currently on the market. However, Barr, in conjunction with Cardinal and, Pliva, in conjunction with Banner, plan to introduce the only two generic nimodipine products in the fall of this year.

Organ preservation solutions are used during the harvest of donor organs to flush and preserve them prior to transplant. Barr and Pliva are the only two significant competitors for these solutions.

In each of the three generic drug markets, the FTC determined that Barr and Pliva are two of a small number of suppliers offering the product, or are the only two future competitors. The number of generic suppliers has a direct and substantial effect on generic pricing, as each additional generic supplier can have a competitive impact on the market. Because there are (or will be) multiple generic equivalents for the three pharmaceutical products at issue here, the branded versions do not (or will not) significantly constrain the generics’ pricing.

The market for organ preservation solutions also is highly concentrated, according to the complaint, and the acquisition as proposed would provide Barr with a near monopoly share absent the relief required by the consent order.

The complaint states that entry into the manufacture and sale of the four relevant products would not be timely, likely, or sufficient to counteract the alleged anticompetitive impact of the acquisition as proposed. There are significant regulatory barriers to entry, including gaining FDA approval for each drug. Further, in the case of organ preservation products, doctors are likely to be reluctant to switch to a new manufacturer.

Finally, the FTC contends that the proposed acquisition likely would eliminate actual, direct, and substantial competition between Barr and Pliva in the relevant markets by increasing the likelihood that Barr would be able to exercise unilateral market power, by increasing the likelihood and degree of coordinated interaction between the few remaining competitors, and by increasing the likelihood that consumers would pay more for these products.
In the markets for generic trazodone hydrochloride tablets and generic triamterene/HCTZ tablets, the FTC’s consent order requires Barr to divest all of the Barr assets for these products to Apotex within 10 days of the acquisition. The order contains specific terms to ensure the divestitures are successful, including the requirement that Barr provide Apotex with various transitional services to enable it to compete successfully in these markets right away. According to the Commission, Apotex is a reputable generic manufacturer and is well-positioned to manufacture and market the acquired products in a competitive manner. In addition, Apotex does not compete in the U.S. market for these two drugs.

The order preserves the actual and potential competition in the market for generic nimodipine soft-gel capsules by requiring either that: 1) Barr divest Pliva’s nimodipine assets to Banner no later than 10 days after the acquisition; or 2) Barr divest its own nimodipine assets to Cardinal no later than 60 days after the acquisition. Both Banner and Cardinal are reputable soft-gel capsule manufacturers and are well-positioned to make and sell nimodipine because they already are manufacturing generic nimodipine soft-gel capsules through joint ventures with Pliva and Barr, respectively.

The order addresses competition in the market for organ preservation solutions by requiring Barr to divest Pliva’s organ preservation solution, Custodial, to New Custodial LLC no later than 10 days after the acquisition.

The consent order also allows the FTC to appoint a divestiture trustee if any of the proposed divestitures are not completed within six months and to appoint an interim trustee to oversee certain components of the divestitures, if necessary. Barr also must sign an agreement with the interim monitor appointed by the FTC, whose job it will be to ensure the Commission is informed about the status of the proposed divestitures.
The Commission vote to approve the consent order was 5-0.

Authored by

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