Federal Register, Volume 82 Issue 191 (Wednesday, October 4, 2017)

[Federal Register Volume 82, Number 191 (Wednesday, October 4, 2017)]
[Notices]
[Pages 46238-46241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21291]

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FEDERAL TRADE COMMISSION

[File No. 171 0084]

Integra LifeSciences Holdings Corporation and Johnson & Johnson;
Analysis 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 to Aid Public Comment describes both the
allegations in the 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 October 27, 2017.

ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write: ``Integra LifeSciences
et al.; FTC File No. 1710084'' on your comment, and file your comment
online at https://ftcpublic.commentworks.com/ftc/integradivest by
following the instructions on the web-based form. If you prefer to file
your comment on paper, write ``Integra LifeSciences et al.; FTC File
No. 1710084'' on your comment and on the envelope, and mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D),
Washington, DC 20580, or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC
20024.

FOR FURTHER INFORMATION CONTACT: Aylin M. Skroejer, (202-326-2459),
Bureau of Competition, 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 a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has 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 September 27, 2017), on the World Wide Web,
at https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before October 27,
2017. Write ``Integra LifeSciences et al.; FTC File No. 1710084'' 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 https://www.ftc.gov/policy/public-comments.
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/integradivest by following the instructions on the web-based form.
If this Notice appears at http://www.regulations.gov/#!home, you also
may file a comment through that Web site.
If you prefer to file your comment on paper, write ``Integra
LifeSciences et al.; FTC File No. 1710084'' on your comment and on the
envelope, and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. If possible, submit your paper comment to the
Commission by courier or overnight service.
Because your comment will be placed on the publicly accessible FTC
Web site at https://www.ftc.gov, you are solely responsible for making
sure that your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else's Social
Security number; date of

[[Page 46239]]

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, such as medical records or other individually identifiable
health information. In addition, your comment should not include any
``trade secret or any commercial or financial information which . . .
is privileged or confidential''--as provided by 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)--
including in particular competitively sensitive information such as
costs, sales statistics, inventories, formulas, patterns, devices,
manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). 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). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC Web site--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC Web site,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC 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 October 27, 2017. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

Introduction

The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from Integra LifeSciences Holdings Corporation
(``Integra'') and Johnson & Johnson designed to remedy the
anticompetitive effects resulting from Integra's proposed purchase of
certain assets of Johnson & Johnson's Codman Neuro (``Codman'')
division. The proposed Decision and Order (``Order'') contained in the
Consent Agreement requires the parties to divest all rights and assets
to Natus Medical Incorporated (``Natus'') related to Integra's
intracranial pressure monitoring systems and fixed pressure valve shunt
systems, as well as Codman's cerebrospinal fluid collection systems,
non-antimicrobial external ventricular drainage catheters, and dural
grafts.
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After thirty days, the Commission will review the comments received and
decide whether it should withdraw, modify, or make the Consent
Agreement final.
Under the terms of the Asset Purchase Agreement signed on February
14, 2017, Integra will acquire Codman in a transaction valued at
approximately $1.0 billion (the ``Acquisition''). The Commission's
Complaint alleges 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 substantially lessening competition in the U.S. markets for
intracranial pressure monitoring systems, cerebrospinal fluid
collection systems, non-antimicrobial external ventricular drainage
catheters, fixed pressure valve shunt systems, and dural grafts. The
proposed Consent Agreement will remedy the alleged violations by
preserving the competition that otherwise would be lost in these
markets as a result of the proposed Acquisition.

The Parties

Integra, headquartered in Plainsboro, New Jersey, is a medical
device company with worldwide operations and one of the largest
surgical instrument suppliers in the United States. The company has two
U.S. business units: Specialty Surgical Solutions and Orthopedics and
Tissue Technologies. The Specialty Surgical Solutions division offers
instruments and systems for, among other specialties, neurosurgery and
critical care.
Codman, part of Johnson & Johnson's DePuy Synthes Inc. business
unit, is a global medical device company that offers a diverse
portfolio of neurosurgery, neurovascular, and drug delivery products,
including instruments and systems for hydrocephalus management,
neurointensive care, and cranial surgery, as well as implantable drug
infusion systems. The proposed transaction excludes Codman's
neurovascular and drug delivery businesses.

The Relevant Products and Structure of the Markets

I. Intracranial Pressure Monitoring Systems

Intracranial pressure monitoring systems are used in intensive care
units and operating rooms to measure pressure inside the skull, which
can increase in the event of traumatic brain injury, hydrocephalus,
intracranial tumors, and other medical conditions. An increase in
intracranial pressure can severely damage the brain or spinal cord and
is a common cause of death in neurosurgical patients, making quick
detection of pressure buildup critical. Intracranial pressure
monitoring systems use a pressure-sensitive probe inserted through the
skull to send measurements via a transducer cable to a monitor at the
patient's bedside. Customers would not switch to an alternative product
in response to a small but significant increase in the price of
intracranial pressure monitoring systems.
Integra and Codman are the only significant suppliers in the U.S.
market for intracranial pressure monitoring systems, accounting for 68%
and 26% of 2016 sales, respectively. The remainder of the market is
comprised of small, fringe competitors that have limited competitive
significance.

II. Cerebrospinal Fluid Collection Systems

Cerebrospinal fluid collection systems drain excess cerebrospinal
fluid and monitor pressures within the fluid. They consist of a plastic
drainage bag, tubing, and other accessories that connect to a patient
through an external ventricular drainage catheter. There are no viable
alternatives to cerebrospinal fluid collection systems.
Integra, Codman, and Medtronic are the only competitively
significant suppliers of cerebrospinal fluid collection systems in the
United States. Integra is the leading supplier with 57%

[[Page 46240]]

of the market. Medtronic accounts for an additional 27% of the market,
and Codman has a share of 14%. The next closest competitor is
M[ouml]ller Medical, which offers a more complex technology and only
accounts for a nominal share of the market.

III. Non-Antimicrobial External Ventricular Drainage Catheters

External ventricular drainage catheters funnel excess cerebrospinal
fluid from the brain to cerebrospinal fluid collection systems to
relieve intracranial pressure. External ventricular drainage catheters
are either antimicrobial or non-antimicrobial, and the two types
constitute distinct antitrust markets because of the substantial
differences between them. Non-antimicrobial external ventricular
drainage catheters lack an antibiotic coating and are suitable for less
critical patients; they also may be used to avoid the risk of
antibiotic interference when diagnosing infections. They are
significantly less expensive than antimicrobial external ventricular
drainage catheters. Customers would not switch from non-antimicrobial
external ventricular drainage catheters to the antimicrobial versions
or any other product in response to a 5% to 10% increase in the price
of non-antimicrobial external ventricular drainage catheters, in part
because even with such a price increase, antimicrobial external
ventricular drainage catheters would still be considerably more
expensive.
Integra and Codman account for 29% and 17% of the relevant market
in the United States. The only other competitively significant firm is
Medtronic, with a 51% share.

IV. Fixed Pressure Valve Shunt Systems

Shunts are the primary tool that neurosurgeons use to treat
hydrocephalus, or excessive accumulation of cerebrospinal fluid. Shunt
systems redirect excess cerebrospinal fluid from the brain or spinal
cord to another area of the body, usually the abdomen, for
reabsorption. Shunt systems consist of three components: A ventricular
catheter inserted into the brain, a valve to regulate the flow of the
fluid, and another catheter that is threaded to the location where the
fluid is emptied. Once implanted, the one-way valve in the shunt system
regulates the pressure in the brain by governing the amount and
pressure of cerebrospinal fluid passing through the catheter.
There are two main types of hydrocephalus shunts: Fixed pressure
valve shunts and programmable valve shunts. Fixed pressure valve shunts
allow cerebrospinal fluid to pass through the shunt only when the
pressure has exceeded some predetermined setting, which medical
providers cannot adjust once implanted without another surgery. The
settings on a programmable valve shunt system, which is significantly
more expensive, can be adjusted non-invasively using specially designed
magnetic tools. An insufficient number of customers are likely to
switch to programmable valve shunts to prevent a small but significant
increase in the price of fixed pressure valve shunt systems.
Integra, Codman, and Medtronic are the only significant suppliers
of fixed pressure valve shunt systems. Medtronic accounts for 55% of
U.S. sales, and Integra follows at 23% share and Codman at 15% share.
Aesculap and Sophysa hold small, fringe positions in the market and
their products are not close substitutes to those of Integra and
Codman.

V. Dural Grafts

Dural grafts are used to repair or replace a patient's dura mater,
the thick membrane that surrounds the brain and spinal cord and keeps
cerebrospinal fluid in place. Integra leads the U.S. market with 66%
share of 2016 sales. In addition, Integra manufactures approximately
77% of the dural grafts sold in the United States. Medtronic, Codman,
and Stryker account for 11%, 9%, and 8% of sales, respectively. Other
suppliers account for only a nominal share of the market.

The Relevant Geographic Market

The United States is the relevant geographic market in which to
analyze the effects of the proposed Acquisition. These products are
medical devices regulated by the U.S. Food and Drug Administration
(``FDA''). Medical devices sold outside of the United States, but not
approved for sale in the United States, do not provide viable
competitive alternatives for U.S. consumers.

Competitive Effects of the Acquisition

The proposed Acquisition would cause substantial competitive harm
in the relevant markets. The parties are the only significant suppliers
of intracranial pressure monitoring systems in the U.S. market, and two
of only three significant suppliers of cerebrospinal fluid collection
systems, non-antimicrobial external ventricular drainage catheters, and
fixed pressure valve shunt systems in the United States. In the dural
grafts market, a combined Integra/Codman would control the vast
majority of the U.S. market and eliminate the close competition that
exists between the parties today. Eliminating the head-to-head
competition between Integra and Codman in all of these highly
concentrated markets would allow the combined firm to exercise market
power unilaterally, resulting in higher prices and reduced choice for
customers in these markets.

Entry Conditions

Entry in the relevant markets would not be timely, likely, or
sufficient in magnitude, character, and scope to deter or counteract
the anticompetitive effects of the proposed Acquisition. New entry
would require significant investment of time and money to design and
develop an effective product, obtain FDA approval, and develop clinical
history supporting the long-term efficacy of a product. A new entrant
must also establish a sales and marketing infrastructure, have or
develop a track record of service and support, and offer a robust line
of neurosurgical products sufficient to convince potential customers of
the viability of its new product offerings. Such development efforts
are difficult, time-consuming, and expensive, and often fail to result
in a competitive product reaching the market.

The Consent Agreement

The proposed Consent Agreement and Order remedy the competitive
concerns raised by the proposed Acquisition by requiring the parties to
divest to Natus all assets and rights to research, develop,
manufacture, market, and sell Integra's intracranial pressure
monitoring systems and fixed pressure valve shunt systems, as well as
Codman's cerebrospinal fluid collection systems, non-antimicrobial
external ventricular drainage catheters, and dural grafts. Integra is
also required to divest its San Diego, California facility that
manufactures a key component of its intracranial pressure monitoring
systems. Additionally, to further ensure the divestitures are
successful, the proposed Order requires the parties to supply Natus
with cranial access kits for a limited time until Natus is able to
secure supply of that product independently. The kit, which is often
sold with the divestiture assets, includes items such as a hand drill,
forceps, and sutures used during cranial surgery. The provisions of the
Consent Agreement ensure that Natus becomes an independent, viable, and
effective competitor in the respective U.S. markets in order to
maintain the competition that currently exists.

[[Page 46241]]

Based in Pleasanton, California, Natus is a global healthcare
company that provides screening, diagnostic, and monitoring solutions
for its three business units: Neurology, newborn care, and hearing and
balance care. Its neurology business includes systems that are highly
complementary to the divestiture assets and test for a variety of
medical conditions, including epilepsy, head injury, tumors,
Parkinson's, and sleep apnea. Natus is well positioned to restore the
competition that otherwise would have been lost pursuant to the
proposed Acquisition.
The parties must accomplish the divestitures and relinquish their
rights to Natus no later than ten days after consummating the proposed
Acquisition. If the Commission determines that Natus is not an
acceptable acquirer, or that the manner of the divestitures is not
acceptable, the proposed Order requires the parties to unwind the sale
of rights to Natus and then divest the products to a Commission-
approved acquirer(s) within six months of the date the Order becomes
final.
To ensure compliance with the Order, the Commission has agreed to
appoint a Monitor to ensure that Integra and Johnson & Johnson comply
with all of their obligations pursuant to the Consent Agreement and to
keep the Commission informed about the status of the transfer of the
rights and assets to Natus. The proposed Order further allows the
Commission to appoint a trustee in the event the parties fail to divest
the products as required.
The purpose of this analysis is to facilitate public comment on the
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. 2017-21291 Filed 10-3-17; 8:45 am]
BILLING CODE 6750-01-P