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U.S. FTC makes Actavis’ acquisition of Forest subject to conditions

By Gabriele Accardo and Aurelia Magdalena Goerner

On 30 June 2014, the U.S. Federal Trade Commission (“FTC”) stated that, in order to address the competition concerns raised by Actavis’s proposed acquisition of Forest Laboratories, it has tentatively accepted the proposed settlement agreement between the FTC’s Bureau of Competition and the two pharmaceutical companies.

In brief, under the proposed settlement agreement, Actavis and Forest agreed to sell or relinquish their rights to four generic pharmaceuticals that treat hypertension, angina, cirrhosis, and prevent seizures.

According to the FTC’s complaint, the effects of the proposed acquisition, as originally proposed, would violate federal antitrust laws insofar as it may substantially lessen competition in the markets for three generic products that treat hypertension, angina and cirrhosis. In particular, the number of suppliers in the markets concerned would be reduced from three to two (for angina) and from four to three (for hypertension and cirrhosis), whereas market concentration would increase substantially post-merger.

Moreover, the proposed transaction would delay the introduction of generic competition against Lamictal ODT, the branded lamotrigine orally disintegrating tablets used to prevent seizures, manufactured by Forest and marketed by GlaxoSmithKline (“GSK”). No companies currently market a generic version in the U.S., whereas Actavis holds the only approved abbreviated new drug application to market generic Lamictal ODT. Thus, absent the proposed acquisition, Actavis is likely to be the first generic entrant and would be the sole competitor to Forest/GSK’s branded Lamictal ODT product for a significant period of time.

In particular, under the proposed settlement agreement, the companies have agreed to relinquish their rights to market generic diltiazem hydrochloride to Valeant Pharmaceuticals International, sell generic ursodiol and generic lamotrigine ODT to Impax Laboratories, and sell generic propranolol hydrochloride to Catalent Pharma Solutions.

The proposed settlement will preserve competition in the markets for these important drugs and is part of the FTC’s ongoing effort to protect U.S. consumers from higher heath care-related costs.

A description of the consent agreement package will be published in the Federal Register by the FTC shortly. Following a public consultation that will last until 30 July 2014, the FTC will decide whether to make the proposed consent order final. A monitoring trustee will then oversee the swift implementation of the consent order.

It may be recalled that last June 2013, the U.S. Supreme Court reversed the eleventh Circuit opinion in the landmark FTC v. Actavis case (see Newsletter 3-4 2013, p. 3 for more background), holding that reverse payment settlement agreements may violate federal antitrust laws but are not a per se violation, thus recognizing the impact that such settlement agreements would have on American consumers in the pharmaceutical market. Yet the validity of such agreements will still be tested under the rule-of-reason. 

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