Insights

FTC Allows Teva's Acquisition of IVAX But Requires Divestitures

On January 23, 2006, the Federal Trade Commission ("FTC") announced a Consent Agreement (subject to final approval) that will allow Teva Pharmaceutical Industries Ltd. ("Teva") to acquire IVAX Corporation ("IVAX"), an acquisition valued at approximately $7.4 billion. However, the FTC has mandated that Teva divest/assign manufacturing and/or marketing rights to fifteen generic pharmaceutical products ("fifteen products"): (1) amoxicillin clavulanate potassium, (2) long-acting cefaclor (cefaclor LA) tablets, (3) pergolide mesylate tablets, (4) estazolam tablets, (5) leuprolide acetate injection kits, (6) nabumetone tablets, (7) amoxicillin, (8) propoxyphene hydrochloride capsules, (9) nicardipine hydrochloride capsules, (10) flutamide capsules, (11) clozapine tablets, (12) tramadol/acetaminophen tablets, (13) glipizide and metformin hydrochloride tablets, (14) calcitriol injectables, and (15) cabergoline tablets. Each of the fifteen products will be divested to either Par Pharmaceutical Companies, Inc. ("Par") or Barr Pharmaceuticals, Inc. ("Barr"), with Par receiving products numbered 1 - 8, 10-11, and 14, and Barr receiving products numbered 9, 12-13, and 15.

The FTC in its Complaint alleged that Teva's acquisition of IVAX would violate Section 7 of the Clayton Act, as amended, and Section 5 of the FTC Act. In its Analysis of Agreement Containing Consent Orders to Aid Public Comment ("Analysis"), the FTC expressed concern that in each of the markets for the fifteen products, there are a limited number of competitors. The FTC asserted that the number of generic suppliers has a "direct and substantial" effect on generic pricing, that generic pricing is largely no longer restricted by the branded versions, and that the presence of certain competitors even with a relatively small market share can assist in restraining prices. The FTC in the Complaint referenced a number of barriers to entry in these markets, and asserted that entry was not likely to deter or counteract the alleged anticompetitive effects of the proposed transaction.

The Decision and Order contains numerous provisions regarding divestiture logistics, particularly for the transfer of technology, product supplies and employee knowledge; as well as requirements for an Interim Monitor and a potential Divestiture Trustee should the parties fail to comply with the specified requirements.

The Complaint and the Decision and Order enumerate the details regarding the markets and divestitures of the various fifteen products. The FTC, in its Analysis, provided specific information regarding the current owners, future acquirers and types of rights for each of the respective fifteen products; stating that the companies must assign the rights and/or assets necessary to manufacture or market the fifteen products to Par or Barr.

For additional information about this Antitrust Development, please contact Toby G. Singer, leader of the Health Care Antitrust Practice.

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