[Federal Register Volume 63, Number 169 (Tuesday, September 1, 1998)]
[Notices]
[Pages 46451-46452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23450]
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FEDERAL TRADE COMMISSION
[File No. 951-0097]
Merck & Co., Inc., et al.; 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 or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before November 2, 1998.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and PA. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
William Baer or Willard Tom, FTC/H-394, Washington, D.C. 20580. (202)
326-2932 or 326-2786.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (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 sixty (60) 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 August 27, 1998), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, NW.,
Washington, DC 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Such comments or views will be considered by
the Commission and will be available for inspection and copying at its
principal office in accordance with section 4.9(b)(6)(ii) of the
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission has accepted, subject to final
approval, an Agreement Containing Consent Order from Merck and Co.,
Inc. (``Merck'') and Merck-Medco Managed Care, LLC (``Medco''), (or
``Proposed Respondents'') in resolution of antitrust concerns arising
from Merck's acquisition of Medco.
The proposed consent order (``Order'') has been placed on the
public record for sixty (60) days for reception of comments by
interested persons. Comments received during this period will become
part of the public record. After sixty (60) days, the Commission will
again review the Agreement and the comments received and will decide
whether it should withdraw from the Agreement or make final the
Agreement's proposed Order.
The Commission has reason to believe that Merck's acquisition of
Medco may substantially lessen competition in violation of Section 7 of
the Clayton Act, as amended, 15 U.S.C. 18 and Section 5 of the FTC Act,
as amended, 15 U.S.C. 45. The Order, if issued by the Commission, would
settle the allegations of the proposed Complaint (``Complaint'').
The Complaint in this matter alleges that Merck is engaged in the
development, production and sale of pharmaceutical products, including
Mevacor and Zocor, which are HMG-CoA reductase inhibitors used for
treating high cholesterol; and Prinivil and Vasotec, which are ACE
Inhibitors used for treating hypertension, high blood pressure and
heart disease. It further alleges that Merck's subsidiary, Medco, is
engaged in the business of providing pharmacy benefit management
services to corporations, insurance companies, labor unions, third
party payors, and other members of the healthcare industry.
The Complaint further alleges that a relevant line of commerce
within which to analyze the effects of this acquisition is the
provision of pharmacy benefit management (``PBM'') services by national
full-service PBM firms, and any narrower markets contained therein.
Other relevant lines of commerce within which to analyze the effects of
this acquisition are the development, manufacture and sale of
pharmaceutical products in specific therapeutic
[[Page 46452]]
categories, and narrower markets contained therein (including, but not
limited to, the markets for HMG-CoA reductase inhibitors and ACE
Inhibitors). It further alleges that the relevant market for PBM
services by national full-service PBM firms, as well as the relevant
markets for pharmaceutical products in specific therapeutic categories,
are moderately to highly concentrated.
The Complaint further alleges that there are substantial barriers
to entry into the relevant markets. Even if new entry were to occur, it
would take a long time, during which time substantial harm to
competition could occur.
The Complaint further alleges that as part of its PBM services,
Medco maintains a drug formulary, which is a listing, by therapeutic
category, of ambulatory drug products that are approved for use by the
U.S. Food & Drug Administration, and which is made available to
pharmacies, physicians, third-party payors, and other persons, to guide
in the prescribing and dispensing of pharmaceuticals. Merck
pharmaceutical products are included on the Medco formulary. Medco
provides a variety of other PBM services, including claims processing,
drug utilization review, pharmacy network administration, mail service,
and related services. Medco negotiates with pharmaceutical
manufacturers, including Merck, concerning placement of drugs on the
Medco formulary, rebates, discounts, prices to be paid for
pharmaceutical products purchased pursuant to pharmacy benefit plans
managed by Medco, and similar matters. Medco thereby influences the
prices of pharmaceutical products and the availability of such products
under the Medco pharmacy benefit plans.
The Complaint further alleges that the effects of the acquisition
of Medco by Merck may be substantially to lessen competition in the
relevant markets in violation of 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, in the following ways, among others:
(a) Products of manufacturers other than Merck are likely to be
foreclosed from Medco's formularies;
(b) Reciprocal dealing, coordinated interaction, interdependent
conduct, and tacit collusion among Merck and other vertically
integrated pharmaceutical companies will be enhanced;
(c) Medco has been eliminated as an independent negotiator of
pharmaceutical prices with manufacturers;
(d) Incentives of other manufacturers to develop innovative
pharmaceuticals will be diminished; and
(e) Pharmaceutical prices are likely to increase and the quality of
the pharmaceuticals available to consumers is likely to diminish.
The Complaint further alleges that the acquisition of Medco by
Merck violates 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.
The Order requires Merck to cause Medco to maintain and make
available an Open Formulary, and provides that the Medco ``Universal
Formulary'' complies with this provision. A copy of this formulary is
appended to the Order. For the purposes of the Order, an open formulary
is defined as a formulary that allows the inclusion of any ambulatory
(i.e., non-hospital) prescription drug product which the Medco
independent Pharmacy and Therapeutics Committee (``P&T Committee'')
determines is appropriate for inclusion in such formulary.
The Order requires that Medco appoint an independent P&T Committee
to administer the formulary. This committee will make all decisions
concerning the inclusion and exclusion of drugs on the Open Formulary.
The Order sets forth the parameters under which the P&T Committee is to
operate.
The Order also requires that Merck cause Medco to accept all
discounts, rebates or other concessions offered by any other
manufacturer of pharmaceutical products on the Open Formulary, and
requires that all such discounts, rebates and concessions be truthfully
and accurately reflected in determining relative rankings of products
on the Open Formulary. Nothing in the Order prohibits Medco from
offering closed formularies as well as the Open Formulary.
The Order also prohibits Merck and Medco from providing,
disclosing, or otherwise making available to each other Non-Public
Information, with certain exceptions for attorneys and auditors. This
includes information concerning other persons' bids, proposals,
contracts, prices, rebates, discounts, and or other terms and
conditions of sale.
The Order also requires Merck for five years to retain all
documents, and to cause Medco to separately retain all documents,
relating to the exclusion of any prescription drugs from the Open
Formulary, any preference or ranking accorded to any prescription drug
on the Open Formulary, and statements or indications of discounts,
rebates or other concessions.
The Order also requires Merck and Medco to make known the
availability of the Open Formulary to persons who currently have a PBM
service agreement or formulary agreement with Medco, and (for a period
of five years) to prospective customers.
The Order also compels Merck and Medco to fulfill certain standard
notification, reporting and inspection requirements.
The Order terminates seven years from the date it becomes final.
It is anticipated that the Order would resolve the competitive
problems alleged in the Complaint. The purpose of this analysis is to
facilitate public comment on the Order, and it is not intended to
constitute an official interpretation of the agreement and Order or to
modify it in any way.
The proposed consent order has been entered into for settlement
purposes only, and does not constitute an admission by Proposed
Respondents that the law has been violated as alleged in the complaint.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-23450 Filed 8-31-98; 8:45 am]
BILLING CODE 6750-01-M