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From Antitrust Law Daily, July 27, 2016

Merged Teva, Allergan entity to divest 79 generic drugs, settling FTC competition concerns

By Greg Hammond, J.D.

Teva Pharmaceutical Industries Ltd. has agreed to divest 79 generic pharmaceutical products, settling FTC charges that the company’s proposed $40.5 billion acquisition of Allergan plc’s generic pharmaceutical business would be anticompetitive (In the Matter of Teva Pharmaceutical Industries Ltd., FTC Dkt. C-4589).

"[A]bsent a remedy, the transaction would likely substantially reduce competition in 79 markets for pharmaceutical products, including oral contraceptives, steroidal medications, mental health drugs, and many other products," the Commission declared in a statement.

Competition concerns. The Commission’s complaint claims that the proposed deal would result in an increased likelihood: (1) that Teva would be able to unilaterally exercise market power in various markets; (2) of coordinated interaction between or among the remaining competitors; (3) that customers would be forced to pay higher prices; (4) that the combined entity would forego or delay the launch of various products; and (5) that the combined entity would delay, eliminate, or otherwise reduce the substantial additional price competition that would have resulted from an additional supplier of various products.

The FTC considered three additional potential theories of harm beyond individual product overlaps, including: (1) whether the merger would likely lead to anticompetitive effects from the bundling of generic products; (2) whether the merger would likely decrease incentives to challenge the patents held by brand-name pharmaceutical companies and bring new generic drugs to market; and (3) whether the proposed transaction might dampen incentives to develop new generic products. The evidence, however, did not support a finding that these harms would occur.

Divestiture. To counter the increased likelihood of reduced competition, the Commission is requiring Teva to divest its rights and assets related to 79 pharmaceutical products to 11 rival firms, including Mayne Pharma Group Ltd., Impax Laboratories, Inc., Dr. Reddy’s Laboratories Ltd., Sagent Pharmaceuticals, Inc., Cipla Limited, Zydus Worldwide DMCC, Mikah Pharma LLC, Perrigo Pharma International D.A.C., Aurobindo Pharma USA, Inc., Prasco LLC, and 3M Company.

"Millions of Americans rely daily on generic drugs to treat a wide range of illnesses," commented Debbie Feinstein, Director of the FTC’s Bureau of Competition. "The FTC’s settlement safeguards the competitive availability of these medications for patients across the country who depend on them."

Teva response. "We are pleased to have received all of the requisite regulatory approvals for our acquisition of Actavis Generics," stated Erez Vigodman, Teva President and CEO. "The new Teva will be ideally positioned to realize the opportunities the global and U.S. generic markets offer. Through our best-in-class R&D capabilities and product pipeline, the world’s largest medicine cabinet and product portfolio, one of the most competitive fully integrated operational networks in the industry, extensive global commercial deployment and go-to-market platforms, we will be able to achieve greater efficiencies for the benefit of patients, healthcare systems and investors around the world. The transaction strongly reinforces our strategy and yields very compelling economics. As a result, it opens a new set of possibilities for us in generics and specialty medicines."

Companies: Teva Pharmaceutical Industries Ltd.; Allergan plc

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