[Federal Register Volume 79, Number 76 (Monday, April 21, 2014)]
[Notices]
[Pages 22133-22136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08950]
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FEDERAL TRADE COMMISSION
[File No. 131-0221]
Akorn Enterprises, Inc. and Hi-Tech Pharmacal Co., Inc.; Analysis
of Agreement Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis of Agreement Containing Consent Orders to Aid
Public Comment describes both the allegations in the draft complaint
and the terms of the consent orders--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before May 14, 2014.
ADDRESSES: Interested parties may file comments at https://ftcpublic.commentworks.com/ftc/akornconsent online or on paper, by
following the instructions in the Request for Comments part of the
SUPPLEMENTARY INFORMATION section below. Write ``Akorn/Hi-Tech
Pharmacal.--Consent Agreement; File No. 131-0221'' on your comment and
file your comment online at https://ftcpublic.commentworks.com/ftc/akornconsent by following the instructions on the web-based form. If
you prefer to file your comment on paper, mail or deliver your comments
to the following address: Federal Trade Commission, Office of the
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Lisa De Marchi Sleigh, Bureau of
Competition, (202-326-2535), 600 Pennsylvania Avenue NW., Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing consent
[[Page 22134]]
orders to cease and desist, having been filed with and accepted,
subject to final approval, by the Commission, having been placed on the
public record for a period of thirty (30) days. The following Analysis
to Aid Public Comment describes the terms of the consent agreement, and
the allegations in the complaint. An electronic copy of the full text
of the consent agreement package can be obtained from the FTC Home Page
(for April 14, 2014), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue NW., Washington, DC
20580, either in person or by calling (202) 326-2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before May 14, 2014.
Write ``Akorn/Hi-Tech Pharmacal.--Consent Agreement; File No. 131-
0221'' on your comment. Your comment--including your name and your
state--will be placed on the public record of this proceeding,
including, to the extent practicable, on the public Commission Web
site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of
discretion, the Commission tries to remove individuals' home contact
information from comments before placing them on the Commission Web
site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comment online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/akornconsent by following the instructions on the web-based forms.
If this Notice appears at http://www.regulations.gov/#!home, you also
may file a comment through that Web site.
If you file your comment on paper, write ``Akorn/Hi-Tech
Pharmacal.--Consent Agreement; File No. 131-0221'' on your comment and
on the envelope, and mail or deliver it to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580. If possible,
submit your paper comment to the Commission by courier or overnight
service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before May 14, 2014. You can find more information,
including routine uses permitted by the Privacy Act, in the
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from Akorn Enterprises, Inc. (``Akorn'') that is designed
to remedy the anticompetitive effects in five generic pharmaceutical
markets resulting from Akorn's acquisition of Hi-Tech Pharmacal Co.,
Inc. (``Hi-Tech''). Under the terms of the proposed Consent Agreement,
the parties are required to divest either Akorn's or Hi-Tech's rights
and assets related to three generic ophthalmic prescription products:
(1) Generic Ciloxan drops, (2) generic Ilotycin ointment, and (3)
generic Quixin drops, and two topical anesthetic products, (4) generic
Xylocaine jelly, and (5) EMLA cream (collectively, the ``Products'') to
Watson Laboratories, Inc. (``Watson''), a wholly-owned subsidiary of
Actavis plc.
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments from interested persons.
Comments received during this period will become part of the public
record. After thirty days, the Commission will again evaluate the
proposed Consent Agreement, along with the comments received, in order
to make a final decision as to whether it should withdraw from the
proposed Consent Agreement, or make final the Decision and Order
(``Order'').
Pursuant to an Agreement and Plan of Merger dated August 26, 2013,
Akorn proposes to acquire all of the voting securities of Hi-Tech, for
approximately $640 million (the ``Proposed Acquisition''). The
Commission alleges in its Complaint that the Proposed Acquisition, if
consummated, would violate Section 7 of the Clayton Act, as amended, 15
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. 45, by lessening current and/or future competition
in U.S. markets for the following pharmaceutical products: (1) Generic
Ciloxan drops, (2) generic Ilotycin ointment, (3) generic Quixin drops,
(4) generic Xylocaine jelly, and (5) generic EMLA cream. The proposed
Consent Agreement will remedy the alleged violations by preserving the
competition that would otherwise be eliminated by the Proposed
Acquisition.
The Products and Structure of the Markets
The Proposed Acquisition would reduce the number of suppliers in
the relevant markets, each of which has or will have a limited number
of market participants. In pharmaceutical product markets with generic
competition, price generally decreases as the number of generic
competitors increases. Accordingly, the reduction in the number of
suppliers within each relevant market would have a direct and
substantial anticompetitive effect on pricing.
The Proposed Acquisition would reduce current competition in
markets for two generic prescription ophthalmic products--generic
Ciloxan drops and generic Quixin drops--as well as reduce current
competition in the markets for generic Xylocaine jelly and generic
[[Page 22135]]
EMLA cream, which are topical anesthetic prescription products. The
structure of these markets is as follows:
The generic Ciloxan opthalmic drops market currently has
four suppliers: Akorn, with a market share of approximately 12%, Hi-
Tech, with a market share of approximately 16%, Novartis Corporation
(``Novartis''), with a market share of approximately 47%, and PACK
Pharmaceuticals (``PACK''), with a market share of approximately 25%.
The proposed transaction would reduce the number of suppliers in this
market from four to three, and would give the merged firm a market
share of approximately 28%.
The generic Quixin ophthalmic drops market currently has
three suppliers: Akorn, with a market share of approximately 15%, Hi-
Tech, with a market share of approximately 23%, and PACK, with a market
share of approximately 62%. The proposed transaction would reduce the
number of suppliers in this market from three to two, and would give
the merged firm a market share of approximately 38%.
The generic Xylocaine jelly market has three suppliers:
Akorn, with a market share of approximately 39%, Hi-Tech, with a market
share of approximately 14%, and Amphastar Pharmaceuticals, Inc.
(``Amphastar''), with a market share of approximately 47%. The proposed
transaction would reduce the number of suppliers of generic Xylocaine
from three to two, and would give the merged firm a market share in
excess of 50%.
The generic EMLA cream market currently has four
suppliers: Akorn, with a market share of approximately 12%, Hi-Tech,
with a market share of approximately 62%, Novartis, with a market share
of approximately 22%, and Global Pharmaceuticals (``Global'') with a
market share of approximately 3%. In addition to marketing generic
EMLA, Akorn markets the branded product. The proposed transaction would
reduce the number of suppliers in the generic market from four to
three, and would give the merged firm a market share in excess of 70%.
The proposed transaction would also reduce future competition in
the generic Ilotycin ophthalmic ointment market. Generic Ilotycin
ophthalmic ointment is prescribed for the treatment of bacterial
infections in the eye. Three firms currently supply generic Ilotycin:
Akorn, Perrigo Company (``Perrigo''), and Bausch + Lomb, Inc. (``Bausch
+ Lomb''). Bausch + Lomb leads the market with a 57% share with Akorn
and Perrigo having market shares of 31% and 12%, respectively. Hi-Tech
appears poised to be the next entrant with a generic Ilotycin product
and there are no other likely entrants for the foreseeable future.
Akorn's acquisition of Hi-Tech would therefore deprive consumers of the
increased competition and likely price reductions that would have
occurred as a result of Hi-Tech's entry.
Entry
Entry into the markets for the Products would not be timely,
likely, or sufficient in magnitude, character, and scope to deter or
counteract the anticompetitive effects of the acquisition. The
combination of drug development times and regulatory requirements,
including U.S. Food and Drug Administration (``FDA'') approval, is
costly and lengthy. Industry participants also note that expertise and
facilities associated with manufacturing topical products, including
sterile products such as ophthalmic products is sufficiently
specialized that a relatively small number of firms participate in such
markets.
Effects
The Proposed Acquisition would likely cause significant
anticompetitive harm to consumers in the relevant generic
pharmaceutical markets by eliminating current and/or future competition
in concentrated existing markets or in future generic markets.
In generic pharmaceuticals markets, price is heavily influenced by
the number of participants with sufficient supply. Market participants
consistently characterize generic drug markets as commodity markets in
which the number of generic suppliers has a direct impact on pricing.
Customers and competitors alike have confirmed that the prices of the
generic pharmaceutical products at issue continue to decrease with new
entry even after a number of suppliers have entered these generic
markets. Further, customers generally believe that having at least four
suppliers in a generic pharmaceutical market produces more competitive
prices than if fewer suppliers are available to them.
The evidence shows that anticompetitive effects are likely to
result from the proposed transaction, due to a decrease in the number
of independent competitors in the markets at issue. In each of the
current generic prescription markets, industry participants have
indicated that the presence of Hi-Tech as a competitor has allowed them
to negotiate lower prices from other suppliers, including Akorn, and
has allowed them to locate additional supply in times of product
shortages from their existing suppliers.
The evidence also shows that the Proposed Acquisition would
eliminate significant future competition between Akorn and Hi-Tech.
Although Hi-Tech does not currently have a marketed product in the
generic Ilotycin market, the Proposed Acquisition eliminates the next
most likely entrant from a very limited pool of future entrants.
By eliminating the significant current and future competition
between the parties, the Proposed Acquisition will likely cause U.S.
consumers to pay significantly higher prices for these generic drugs,
absent a remedy.
The Consent Agreement
The proposed Consent Agreement effectively remedies the Proposed
Acquisition's anticompetitive effects in each of the relevant product
markets. Pursuant to the Consent Agreement, the parties are required to
divest Akorn's or Hi-Tech's rights and assets related to the Products
to Watson. Further, the proposed Consent Agreement requires Akorn to
assign its contract manufacturing agreement for branded and generic
EMLA to Watson. The parties must accomplish these divestitures and
relinquish their rights no later than ten days after the Proposed
Acquisition is consummated.
The Commission's goal in evaluating possible purchasers of divested
assets is to maintain the competitive environment that existed prior to
the Proposed Acquisition. If the Commission determines that Watson is
not an acceptable acquirer of the divested assets, or that the manner
of the divestitures is not acceptable, the parties must unwind the sale
of rights to Watson and divest the Products to a Commission-approved
acquirer within six months of the date the Order becomes final. In that
circumstance, the Commission may appoint a trustee to divest the
Products if the parties fail to divest the Products as required.
The proposed Consent Agreement contains several provisions to help
ensure that the divestitures are successful. The Order requires Akorn
and Hi-Tech to take all action to maintain the economic viability,
marketability, and competitiveness of the products to be divested until
such time that they are transferred to a Commission-approved acquirer.
Depending on the product, Akorn or Hi-Tech must transfer their
respective manufacturing technologies for the Products to Watson and
must supply Watson with these products during a transitional period.
The Commission has agreed to appoint Denise Smart from Smart
Consulting Group, LLC to act as an
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interim monitor to assure that Akorn and Hi-Tech expeditiously comply
with all of their obligations and perform all of their responsibilities
pursuant to the Consent Agreement. In order to ensure that the
Commission remains informed about the status of the transfer of rights
and assets, the Consent Agreement requires Akorn and Hi-Tech to file
reports with the interim monitor who will report in writing to the
Commission concerning performance by the parties of their obligations
under the Consent Agreement.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Order or to modify its terms in
any way.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-08950 Filed 4-18-14; 8:45 am]
BILLING CODE 6750-01-P