[Federal Register: November 27, 2009 (Volume 74, Number 227)]
[Notices]
[Page 62310-62315]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27no09-70]
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FEDERAL TRADE COMMISSION
[File No. 091 0053]
Pfizer Inc. and Wyeth; Analysis of Agreement Containing Consent
Order To Aid Public Comment and Statement of the Federal Trade
Commission
AGENCY: Federal Trade Commission.
ACTION: Notice of acceptance of 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 complaint and
the terms of the consent order--embodied in the consent agreement--that
settle these allegations.
ADDRESSES: Copies of the Statement of the Commission, the Agreement
Containing Consent Orders, the Decision and Order (Redacted Public
Version), the Order To Maintain Assets, the Complaint, the Analysis To
Aid Public Comment, and other materials may be found on the Federal
Trade Commission Web site, at http://www.ftc.gov/os/caselist/0910053/
index.shtm, and may also be secured from the following address: Federal
Trade Commission, Consumer Response Center, Public Reference Room, Room
H-130, 600 Pennsylvania Avenue, NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Michael R. Moiseyev, Bureau of
Competition, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202)
326-3106.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission 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 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 October 14, 2009), on the World Wide Web, at http://www.ftc.gov/
opa/2009/10/pfizer.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.
Analysis of Proposed Agreement Containing Consent Orders To Aid Public
Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') with Pfizer Inc. (``Pfizer''), which is designed to remedy
the anticompetitive effects of its proposed acquisition of Wyeth. Under
the terms of the Consent Agreement, Pfizer must divest to Boehringer
Ingelheim Vetmedica, Inc. (``BI'') Wyeth's U.S. animal health business
(``Fort Dodge'') in all areas of overlap, except for equine tapeworm
parasiticides and equine herpesvirus vaccines. In the area of equine
tapeworm parasiticides, the consent order requires Pfizer to return to
Virbac S.A. (``Virbac'') Pfizer's exclusive distribution rights for
these products. In the area of equine herpesvirus vaccines, Pfizer is
ordered to divest to BI Pfizer's equine herpesvirus products. The
assets for each of the divestitures include all of the relevant
intellectual property, customer lists, research and development
information, and regulatory materials, as well as two of Fort Dodge's
three U.S. manufacturing facilities. These divestitures fully preserve
the competition that the proposed acquisition would otherwise
eliminate.
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 again review the proposed
Consent Agreement and the comments received to decide whether it should
withdraw from the proposed Consent Agreement, modify it, or make final
the accompanying Decision and Order (``Order'').
Pursuant to an Agreement and Plan of Merger dated as of January 25,
2009, Pfizer proposes to acquire all of the issued and outstanding
shares of Wyeth, whereby each outstanding share of Wyeth common stock
will be converted into the right to receive $33 in cash and 0.985 share
of Pfizer common stock. Both parties manufacture human and animal
health biological and pharmaceutical products. The combined firm would
have projected worldwide revenues of almost $72 billion. 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, in U.S. markets for the manufacture and sale of:
(1) Killed cattle respiratory vaccines; (2) modified-live cattle
respiratory vaccines; (3) cattle reproductive vaccines; (4) cattle
pasteurella vaccines; (5) lactating-cow mastitis treatments; (6) dry-
cow mastitis treatments; (7) dairy cattle broad-spectrum antibiotics
with low milk-withholding times; (8) cattle macrocyclic lactone
parasiticides; (9) cattle benzimidazole parasiticides; (10) canine
combination vaccines; (11) canine monovalent parvovirus vaccines; (12)
canine monovalent coronavirus vaccines; (13) canine monovalent
leptospira vaccines; (14) canine bordetella vaccines; (15) feline
combination vaccines; (16) feline leukemia vaccines; (17) companion
animal rabies vaccines; (18) companion animal cephalosporin
antibiotics; (19) equine tapeworm parasiticides containing
praziquantel; (20) equine herpesvirus vaccines; and (21) equine joint-
injected steroids. The proposed Consent Agreement remedies the alleged
violations by replacing in each of the relevant markets the lost
[[Page 62311]]
competition that would result from the acquisition.
II. The Products and Structure of the Markets
The proposed acquisition of Wyeth by Pfizer would combine two of
the largest animal health suppliers in the United States. The companies
overlap in several animal health markets, and, if consummated, the
transaction likely would lead to anticompetitive effects in each of the
relevant markets. More specifically, the transaction would decrease the
number of competing suppliers in the overlap markets, which number has
a direct and substantial effect on the prices of animal health
products. The evidence shows that customers are able to obtain lower
prices by threatening to switch to another supplier or presenting the
incumbent supplier with a rival's lower offer. Customers have stated
that they generally can negotiate lower prices in markets with more
participants and that, historically, they have seen prices rise in
markets in which the number of market participants has declined.
Pfizer and Fort Dodge are the market leaders in the area of cattle
health products. After the transaction, Pfizer would have over 60
percent of several of the relevant cattle product markets. In the
cattle vaccines area, Pfizer and Fort Dodge have broad and
significantly overlapping portfolios of respiratory, reproductive, and
pasteurella vaccines. Customers choose the specific vaccine products
that most closely match their needs based on several factors,
including, among others, disease risk assessments and relative prices.
Killed cattle respiratory vaccines prevent respiratory diseases in
pregnant cattle without the risk of causing abortion. Pfizer and Fort
Dodge account for over 50 percent of all killed respiratory vaccine
sales in the United States. The most commonly used killed respiratory
vaccine is the 5-way vaccine, which prevents infectious bovine
rhinotracheitis, types 1 and 2 of bovine virus diarrhea, parainfluenza
3, and bovine respiratory syncytial virus. As a result of the
acquisition, Pfizer would have 61 percent of the market for killed 5-
way respiratory vaccines, leaving Novartis Animal Health (``Novartis'')
as Pfizer's only significant competitor.
Modified-live cattle respiratory vaccines prevent the same diseases
as killed respiratory vaccines, but contain modified-live rather than
killed antigens to stimulate greater protection. Because modified-live
respiratory vaccines induce stronger immunities, most customers will
use modified-live vaccines for non-pregnant cattle. Pfizer and Fort
Dodge account for over 53 percent of all modified-live respiratory
vaccine sales in the United States. As with killed respiratory
vaccines, the 5-way modified-live respiratory vaccine is the most
commonly used modified-live cattle respiratory vaccine. As a result of
the proposed acquisition, Pfizer would control over 68 percent of the
5-way modified-live respiratory vaccine market.
Cattle reproductive vaccines are used to prevent early- and late-
stage abortions in pregnant cattle. The markets for cattle reproductive
vaccines include, most significantly: (1) The market for modified-live
10-way vaccines, which contain modified-live viral respiratory and
Leptospira antigens; (2) the market for killed 10-way vaccines, which
contain killed viral respiratory and Leptospira antigens; and (3) the
market for lepto/vibrio vaccines, which contain Leptospira and
Campylobacter fetus antigens. After the acquisition, Pfizer would have
83 percent of the $13 million modified-live 10-way market in the United
States, with Intervet/Schering-Plough Animal Health (``ISP''),
AgriLaboratories, Ltd. (``AgriLabs''), and BI accounting for 11
percent, 4 percent, and 2 percent, respectively. Pfizer also would
control 76 percent of sales in killed 10-way vaccines, leaving Novartis
with 18 percent and AgriLabs with 6 percent of this $9 million market.
Finally, in the lepto/vibrio vaccine market, Pfizer and Fort Dodge
collectively account for almost 39 percent of this $2.6 million market,
and Novartis leads with 41 percent.
Cattle pasteurella vaccines are used to prevent pneumonia as well
as lesser respiratory infections in cows caused by Pasteurella
multocida and Mannheimia haemolytica bacteria. Pfizer, Fort Dodge, BI,
ISP, and Merial are the only significant suppliers of products in these
markets in the United States. The proposed acquisition would reduce the
number of competitors in these markets, leaving Pfizer significantly
larger than any of its remaining competitors.
Lactating-cow and dry-cow mastitis treatments are used to treat
infections of the udder that occur during either lactation or the dry
period between pregnancies. The markets for lactating-cow and dry-cow
mastitis treatments are highly concentrated, with Pfizer and Fort Dodge
together accounting for more than 90 percent of sales in each of these
markets.
Broad-spectrum antibiotic products with low milk-withholding times
can be used to treat a large variety of infections that affect dairy
cows.\1\ Pfizer's products are considered the most effective
antibiotics for dairy cows and have a zero-day withholding period,
while Fort Dodge's product has a low withholding period of two to four
days. A generic version of one of Pfizer's products was recently
introduced. As a result of the proposed acquisition, Pfizer would have
a near monopoly in this $162 million market.
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\1\ To ensure that antibiotic-contaminated milk is not
distributed, the United States Food and Drug Administration
(``FDA'') has set ``withholding times'' for each antibiotic product
and mandates that any milk that is produced during the withholding
period be discarded. A principal consideration for dairy farmers in
purchasing antibiotics, therefore, is how quickly they can resume
milk production after treatment.
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Cattle macrocyclic lactone parasiticides are the newest and most
effective class of cattle parasiticides in the United States. They are
effective against both internal and external parasites. There are only
three branded players in the $118 million U.S. market: Pfizer, Fort
Dodge, and Merial. Although generic versions of Merial's product are
available, there are no generic versions of Pfizer's or Fort Dodge's
products currently on the market. The proposed acquisition would
significantly increase the concentration in this market, leaving Pfizer
with approximately 42 percent of the market.
Cattle benzimidazole parasiticides are an older generation of
parasiticides used primarily by cattle breeders to treat internal
parasites, such as lungworms, tapeworms, and liver flukes. Pfizer, Fort
Dodge, and ISP are the only suppliers to offer cattle benzimidazole
parasiticides in the United States. After the proposed acquisition, ISP
would be the only remaining constraint on Pfizer's ability to raise
prices, accounting for 67 percent of this $16 million market. Pfizer
would control the remaining 33 percent of the market.
Beyond cattle health products, Pfizer and Fort Dodge are also two
of only four major suppliers in the relevant companion animal vaccines
and pharmaceuticals markets. In the majority of these markets, the
transaction would reduce the number of competitors from four to three
and give Pfizer between 50 and 100 percent of the market. As in the
cattle vaccines area, Pfizer and Fort Dodge have broad and
significantly overlapping portfolios of companion animal vaccines.
Customers can choose the specific vaccine products that most closely
match their needs based on several factors, including, among others,
vaccination protocols recommended by
[[Page 62312]]
veterinarians and disease risk assessments.
Canine combination vaccines prevent common canine diseases, such as
those caused by canine distemper, adenovirus (types 1 and 2),
parainfluenza, parvovirus, coronavirus, and Leptospira. Pfizer, Fort
Dodge, Merial, and ISP are the four significant companies that supply
canine combination vaccines in the United States. Total U.S. sales of
canine combination vaccines are $126 million. The proposed acquisition
would reduce the number of significant suppliers of canine combination
vaccines from four to three.
While parvovirus, coronavirus, and leptospira vaccines are all
available as part of canine combination vaccines, the monovalent forms
are administered as booster shots for puppies that have a particularly
high risk of exposure to the disease. Pfizer, Fort Dodge, Merial, and
ISP are the only four companies that supply canine monovalent
parvovirus vaccines in the United States, a $2.1 million market. The
proposed acquisition would give Pfizer control of 66 percent of the
canine monovalent parvovirus vaccine market.
The same four players-Pfizer, Fort Dodge, Merial, and ISP-are also
the only four companies that supply canine monovalent coronavirus
vaccines in the United States. The proposed acquisition would further
entrench Pfizer as the dominant supplier with an 81 percent share of
the $2.3 million market for canine monovalent coronavirus vaccines.
In the market for canine monovalent leptospira vaccines, the
proposed acquisition would combine the only two companies that
currently supply such vaccines in the United States. Pfizer currently
has a 53 percent share, and Fort Dodge controls the remaining 47
percent of this $9.2 million market. The proposed acquisition would
grant Pfizer complete control over the market for canine monovalent
leptospira vaccines.
Canine bordetella vaccines are used primarily to prevent infectious
tracheobronchitis, which is the most prevalent upper respiratory
infection contracted by dogs in the United States. There are five
suppliers of canine bordetella vaccines in the United States: Pfizer,
Fort Dodge, ISP, Merial, and BI. Total U.S. sales of canine bordetella
vaccines amount to $53.3 million. The proposed acquisition would reduce
the number of suppliers of canine bordetella vaccines from five to
four, leaving Pfizer significantly larger than its three remaining
competitors.
Feline combination vaccines are used to prevent common feline
diseases, such as feline panleukopenia, rhinotracheitis, chlamydia, and
calicivirus. Pfizer, Fort Dodge, ISP, and Merial are the only
significant suppliers of feline combination vaccines in the United
States. Total U.S. sales of feline combination vaccines are $28
million. The proposed acquisition would reduce the number of
significant suppliers of feline combination vaccines from four to
three, with Pfizer's sales considerably greater than those of its two
remaining competitors.
Feline leukemia vaccines can provide effective protection against
feline leukemia, a fatal disease that breaks down a cat's immune system
to such an extent that it can no longer defend against otherwise
harmless invasions by bacteria, viruses, or other sources of disease.
Pfizer, Fort Dodge, Merial, and ISP are the only companies that supply
feline leukemia vaccines in the United States, sales of which are $38
million. The proposed acquisition would reduce the number of suppliers
from four to three, with Pfizer significantly larger than its two
remaining competitors.
Companion animal rabies vaccines are used to prevent rabies, a
fatal and incurable neurological disease. Pfizer, Fort Dodge, Merial,
and ISP are the only companies that offer companion animal rabies
vaccines in the United States. U.S. sales of such vaccines total
approximately $60 million, and the proposed acquisition would reduce
the number of suppliers of companion animal rabies vaccines from four
to three.
Companion animal cephalosporins are a recent generation of broad-
spectrum antibiotics that are effective against both gram-positive and
gram-negative organisms and can be used to treat a wide range of
infections. Pfizer and Fort Dodge are the only two suppliers of branded
companion animal cephalosporins in the United States. The only other
companion animal cephalosporins are generic human and animal
cephalosporin products. These products, however, have limited
competitive significance because of dosing differences found in the
generic human products and a relative lack of technical and research
support offered with the generic animal products. As a result of the
proposed acquisition, Pfizer would have 70 percent of this $52 million
market.
In addition to cattle and companion animal products, the proposed
acquisition also poses competitive concerns in three equine product
markets: tapeworm parasiticides; herpesvirus vaccines; and joint-
injected steroids. The market for equine tapeworm parasiticides
containing praziquantel consists of products used to treat tapeworms
and other internal parasites, which are the leading cause of equine
colic in the United States. Currently, Pfizer has a 33 percent share of
this approximately $22 million market; Fort Dodge has a 31 percent
market share; and Merial has a 36 percent market share. The proposed
acquisition would give Pfizer 64 percent of the market for equine
tapeworm parasiticides, leaving Merial as its only remaining
competitor.
Equine herpesvirus vaccines are used primarily for the prevention
of equine rhinopneumonitis, an upper respiratory disease, which can
cause abortion in pregnant mares. Pfizer, Fort Dodge, ISP, and BI are
the only suppliers of equine herpesvirus vaccines in the United States,
sales of which total $30 million. The proposed acquisition would reduce
the number of suppliers from four to three, with Pfizer significantly
larger than its two remaining competitors.
Equine joint-injected steroids can be used to reduce joint
inflammation, treat osteoporosis, and prevent lameness in horses.
Pfizer has a 60 percent share of this $7.3 million market, while Fort
Dodge has a 40 percent share. The proposed acquisition would create a
monopoly in the market for equine joint-injected steroids in the United
States.
III. Entry
Entry into the manufacture and sale of the relevant animal health
vaccine and pharmaceutical markets would not be timely, likely, or
sufficient in its magnitude, character, or scope to deter or counteract
the anticompetitive effects of the proposed acquisition. Developing and
obtaining United States Department of Agriculture approval (in the case
of vaccines) for the manufacture and sale of each of the relevant
products can take as many as five years due to substantial regulatory,
technological, and intellectual property barriers. Similarly, obtaining
FDA approval (in the case of pharmaceutical products) can take five to
seven years for a currently developed product and as many as ten or
more years for an entirely new product.
In addition to the regulatory, developmental, and manufacturing
hurdles facing a potential entrant, many of the markets at issue are
characterized by particular conditions that make new entry unlikely.
For example, some products, such as vaccines for cattle, equine, and
companion animals, are particularly difficult to manufacture, have
relatively small profit opportunities, and have a high potential for
adverse reactions and product failure. In other markets, such as those
for companion animal vaccines, a
[[Page 62313]]
substantial initial investment is necessary because veterinarians tend
to purchase all their vaccines from a single supplier; as a result, a
new entrant must develop a large portfolio of vaccines in order to be a
significant competitor.
IV. Effects of the Acquisition
The proposed acquisition would cause significant competitive harm
to consumers in the relevant U.S. markets for cattle, companion animal,
and equine health products by eliminating actual, direct, and
substantial competition between Pfizer and Wyeth. The transaction would
increase the likelihood that Pfizer will be able to unilaterally
exercise market power, increase the likelihood of coordinated
interaction between or among suppliers, reduce Pfizer's incentives to
pursue further research and development, and increase the likelihood
that consumers will pay higher prices. In each of the relevant markets,
the evidence shows that consumers have experienced lower prices,
increased research and development, and better service due to the
competitive rivalry that exists between market participants--
particularly that which currently exists between Pfizer and Wyeth. The
evidence also shows that, when any of the competitors experienced
supply problems, the remaining competitors increased their prices, and,
conversely, that consumers were able to negotiate lower prices when new
rivals entered the relevant markets.
V. The Consent Agreement
The proposed Consent Agreement preserves competition in each of the
relevant markets alleged in the complaint by requiring that Pfizer
divest the following assets to BI no later than ten days after the
acquisition: All of the Fort Dodge assets relating to killed cattle
respiratory vaccines, modified-live cattle respiratory vaccines, cattle
reproductive vaccines, cattle pasteurella vaccines, lactating-cow and
dry-cow mastitis treatments, dairy cattle broad-spectrum antibiotic
products with low milk-withholding times, cattle macrocyclic lactone
parasiticides, cattle benzimidazole parasiticides, canine combination
vaccines, canine monovalent parvovirus vaccines, canine monovalent
coronavirus vaccines, canine monovalent leptospira vaccines, canine
bordetella vaccines, feline combination vaccines, feline leukemia
vaccines, companion animal rabies vaccines, companion animal
cephalosporins, and equine joint-injected steroids, as well as the
Pfizer assets relating to equine herpesvirus vaccines.
The proposed Consent Agreement contains several provisions designed
to ensure that these divestitures are successful. Pfizer must provide
various transitional services to enable BI to compete against Pfizer
immediately following the acquisition, including any technical
assistance that BI may need. Pfizer also must provide BI with the
regulatory approvals, brand names, marketing materials, customer
contracts, and other assets associated with marketing and selling the
divested products in the United States.
BI is a reputable supplier of animal health products and is well
positioned to manufacture and market the divested assets and to compete
effectively in the relevant markets. In the United States, BI's animal
health revenues totaled approximately $215 million in 2008. Moreover,
the acquisition by BI does not present competitive problems in any of
the relevant markets because it currently has either a very limited
presence or no presence at all in each of those areas. With its
resources, capabilities, and experience marketing animal and human
health products, BI is well placed to replicate the competition that
would be lost with the proposed acquisition.
The proposed Consent Agreement also preserves the existing
competition in the equine tapeworm parasiticides market by requiring
Pfizer to return to Virbac Pfizer's distribution rights for the
relevant parasiticide products no later than ten days after the
acquisition. In 2000, Virbac entered into a 15-year licensing agreement
with Pfizer, under which Virbac grants Pfizer exclusive distribution
rights to market and sell the equine tapeworm parasiticide products in
the United States. Virbac is particularly well suited to acquire these
assets because it currently manufactures the products and has the
resources, technical capabilities, and experience to be successful in
restoring the competition that would be lost if the proposed Pfizer/
Wyeth transaction were to proceed unremedied.
If the Commission determines that either BI or Virbac is not an
acceptable acquirer of the assets to be divested, or that the manner of
the divestitures is not acceptable, Pfizer must unwind the sale(s) and
divest the assets within six months of the date the Order becomes final
to another Commission-approved acquirer. If Pfizer fails to divest
within the six months, the Commission may appoint a trustee to divest
the relevant assets.
The proposed remedy also allows for the appointment of an Interim
Trustee, experienced in obtaining regulatory approval and the
manufacture of biologics, to oversee the required technology transfers.
As part of the proposed remedy, Pfizer is required to execute an
agreement conferring all rights and powers necessary for the Interim
Trustee to satisfy his responsibilities under the Order to assure
successful divestitures. The Commission has appointed Dr. Stephen J.D.
Bell of Tunnell Consulting to be the Interim Monitor and it is
anticipated that he will obtain support and assistance from his
colleague, Mr. Arlo Millen. The monitors will ensure that the
Commission remains informed about the status of the proposed
divestitures and asset transfers.
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 Consent Agreement or to modify
its terms in any way.
Statement of the Federal Trade Commission
The Federal Trade Commission has voted to accept a Consent Order in
its investigation of Pfizer Inc.'s proposed acquisition of Wyeth. The
Consent Order remedies the anticompetitive effects that the Commission
believes are likely to result from the transaction in numerous markets
for animal health products. After a thorough investigation, the
Commission has concluded that the transaction does not raise
anticompetitive concerns in any human health product markets. We write
here to explain our decision, provide greater visibility into this
important investigation, and, in the event that there are future such
transactions, describe the framework that we used in our analysis.
The Commission allocated extensive resources to the
investigation.\2\ The price, quality, and availability of prescription
pharmaceutical products has a tremendous impact on health care costs,
and a significant part of the investigation focused on ascertaining
whether the proposed transaction would adversely affect competition in
human pharmaceutical markets. The Commission is dedicated to promoting
competition in health care markets to ensure that costs are contained
and to
[[Page 62314]]
protect incentives for pharmaceutical companies to develop new
medications.
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\2\ During the course of its comprehensive investigation, Bureau
of Competition staff conducted nearly 200 interviews, and reviewed
hundreds of thousands of documents produced by the parties and third
parties. The investigation also involved close cooperation with
foreign competition authorities, including those from Australia,
Canada, the European Union, Mexico, New Zealand, and South Africa.
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I. Background
Pfizer is the largest prescription pharmaceutical company in both
the United States and the world, with $48.4 billion in worldwide
revenues for 2008. In addition to manufacturing and selling
pharmaceutical products, Pfizer also researches and develops new
pharmaceutical products. At the end of 2008, Pfizer had 114 products in
various stages of clinical development. Based on the evidence gathered
during the investigation, Pfizer's overall market share of
pharmaceutical and biotech products totals about 9 percent in the
United States.
At the time of the acquisition, Wyeth was the twelfth-largest
prescription pharmaceutical company in the United States. Wyeth's
worldwide annual revenue totaled about $22.2 billion in 2008, $16.8
billion of which was from pharmaceutical and biological sales. Like
Pfizer, Wyeth also researches, develops, manufactures, and sells
pharmaceutical products and is also a significant participant in the
biologic and vaccine areas of human pharmaceuticals. Wyeth is the
fourth largest biotechnology company by revenue in the world and has 18
biologic products in clinical development.
Although both Pfizer and Wyeth are substantial suppliers of human
pharmaceutical products, their respective product portfolios are highly
complementary. Staff's investigation evaluated numerous potential
overlaps where the companies may compete against each other, either now
or in the future. In particular, the investigation included significant
analysis of four markets--treatments for renal cell carcinoma,
Methicillin-resistant Staphylococcus aureus (or ``MRSA'' infections),
osteoporosis, and Alzheimer's disease--to determine whether the
transaction would undermine competition in those markets. Beyond these
specific overlaps, the staff thoroughly investigated whether the
transaction could have an impact on competition in human pharmaceutical
markets more broadly, whether on innovation, the intellectual property
landscape, clinical development, or marketing. The evidence
demonstrates that it will not.
II. Competitive Effects Analysis
Beyond the areas addressed by the Consent Order, the Commission
analyzed three principal theories of potential competitive harm.
First, we assessed whether the merger might substantially reduce
competition in any relevant human health market in which Pfizer and
Wyeth currently compete. We conclude that it does not.
With respect to a small number of diseases or conditions, including
renal cell carcinoma and MRSA infections, Pfizer and Wyeth both market
treatments. Evidence gathered in the investigation showed that,
although Pfizer and Wyeth produce drugs that target the same
indications, their products are not close substitutes for--or indeed
competitive with--each other. In addition, it appears that in these
markets a sufficient number of other competitors will remain after
consummation of the Pfizer/Wyeth transaction. Moreover, the products
that these other companies offer are closer competitors to either the
Pfizer or Wyeth products than the Pfizer and Wyeth products are to each
other. Accordingly, Pfizer and Wyeth's consolidation is unlikely to
facilitate the exercise of market power in any of these markets.
Second, we assessed whether the evidence supported a challenge
based upon a theory that the transaction threatened to eliminate
potential future competition in any relevant market. We conclude that
it does not.
There are a small number of diseases or conditions for which Pfizer
or Wyeth markets a product where the other company is developing a
potentially competitive product, or both companies are developing
products that could compete against each other in the future. Here, we
considered not only the products that Pfizer and Wyeth are directly
developing, but also products that other companies are developing in
which Pfizer or Wyeth have a financial interest. For example, both
Pfizer and Wyeth are developing products to treat osteoporosis. After
careful investigation, though, we conclude that the transaction is not
likely to affect competition in this market, based on non-public
information that Pfizer's and Wyeth's products are unlikely to be close
competitors.
We also extensively investigated Alzheimer's disease treatments.
Alzheimer's disease is a progressive and terminal neurodegenerative
disorder of the brain that is the sixth-leading cause of death in the
United States, affecting approximately five million people. The number
of Americans suffering from Alzheimer's disease is expected to grow
exponentially, and expenditures on drugs to treat Alzheimer's disease
are expected to more than double in the next ten years. The future
competitiveness of this market, for both economic and therapeutic
reasons, is critical. Consequently, the Commission staff dedicated much
of its time to investigating the competitive landscape in this market,
and how the proposed transaction would affect it, if at all. Pfizer
currently markets a product called Aricept, the leading drug on the
market today to treat Alzheimer's disease, and has several other
products to treat Alzheimer's disease in clinical development. Wyeth
currently does not offer a product to treat Alzheimer's disease, but
does have several products in development.
The explosive growth of the Alzheimer's disease patient population
has caused the market for treatments to attract considerable attention.
Besides Pfizer and Wyeth, a significant number of other companies,
including both large and small pharmaceutical companies and
biotechnology companies, have products in development for the treatment
of the disease. As of today, there are approximately 50 companies with
at least 66 products in various phases of development. Among those
companies are 14 of the largest pharmaceutical companies in the world,
as well as numerous small- and medium-sized pharmaceutical and
biotechnology firms. While there are several different therapeutic
approaches being pursued for Alzheimer's disease, Pfizer and Wyeth
overlap in only a small number of these areas. In those therapeutic
areas where they do overlap, there are several other companies also
developing products.
Overall, the evidence demonstrates that Pfizer and Wyeth's products
are unlikely to be sufficiently close competitors that the elimination
of competition between them would affect the competitiveness of any
relevant human health market. Rather, the most likely outcome is that
they each will compete more closely with products from other companies.
Third, we assessed whether a combined Pfizer/Wyeth would have a
greater ability to engage in anticompetitive bundling, block new drug
development with a merger-created patent thicket, or adversely impact
the market for basic research and innovation in any human health
markets, but with a particular focus on Alzheimer's disease, the area
of most significant overlap. We conclude that the proposed transaction
is unlikely to affect the market(s) in any of these ways.
As part of its investigation, staff evaluated whether the
acquisition would change the negotiating power between Pfizer and its
customers such that consumers would be harmed because of unlawful
tying, bundling, or
[[Page 62315]]
exclusive dealing by Pfizer. Prescription pharmaceutical customers
(e.g., insurance companies) set up bid processes for purchasing
pharmaceutical products on a product-by-product (or category-by-
category) basis and have generally resisted efforts by large
pharmaceutical companies to bundle products across categories, unless
the bundle is in the customer's best interest. We found no evidence
that this acquisition would undermine customers' ability to prevent
anticompetitive bundling. As a result, we conclude that the addition of
the Wyeth portfolio of products to Pfizer's portfolio is not likely to
enhance the merged entity's ability to engage in anticompetitive
bundling, especially because the combined portfolio would contain few
blockbuster drugs.
Staff also investigated whether the acquisition would create a
patent thicket by virtue of the breadth of the combined companies'
patent portfolio. A merger-created patent thicket could reduce or
eliminate competition in human pharmaceutical products by enabling the
combined firm to prevent other pharmaceutical companies from developing
products through the enforcement of intellectual property rights. After
evaluating the parties' respective patent portfolios in a number of
areas where both firms are active, including, most notably, Alzheimer's
disease, the evidence showed that the combination of the intellectual
property of Pfizer with that of Wyeth would not pose any greater
barrier to entry to third-party companies than the intellectual
property held by the companies individually.
Finally, staff evaluated whether the transaction would decrease
basic research or the pace of innovation in pharmaceutical markets by
eliminating a leader in pharmaceutical research and development;
changing the incentives of companies performing pharmaceutical research
and development; or reducing the number of potential research,
marketing, or funding partners. Pharmaceutical research and development
is a dynamic field with multiple participants including both large and
small traditional pharmaceutical companies, specialty pharmaceutical
companies, biotechnology companies, and contract research
organizations. The evidence does not indicate that the combination
raises antitrust concerns in these respects.
Even within the discrete product areas where both Pfizer and Wyeth
are actively pursuing research and development, such as treatments for
Alzheimer's disease, we conclude that the transaction is not likely to
affect competition in basic research or innovation. Within Alzheimer's
disease specifically, fundamental information about the disease,
including its cause, how to diagnose it prior to the appearance of
symptoms, and when intervention must occur to modify the disease, is
still unknown. There is no scientific consensus about the most
promising track for the treatment of Alzheimer's disease. As a result,
it is a dynamic area of drug development, and the many companies
working in this disease area are pursuing many different pathways with
compounds that can have different effects and risk factors.
Although Pfizer and Wyeth are two of the most active companies
pursuing research and development activities in the Alzheimer's disease
area, it is unlikely that the combination of the Pfizer and Wyeth's
Alzheimer's disease pipelines will diminish the incentives of Pfizer or
any other company to compete in the research and development of
Alzheimer's disease treatments. Further, the combination of Pfizer and
Wyeth is not likely to affect the ability of other companies to
continue to develop and ultimately introduce new products to treat
Alzheimer's disease.
The Commission's extensive investigation and commitment of
resources in this matter reflects its dedication to ensuring that
pharmaceutical markets are competitive and that consumers have access
to innovative and affordable medications. Although the Commission,
based on the evidence gathered, determined that this transaction did
not raise anticompetitive concerns in the markets for human
pharmaceuticals, the Commission remains dedicated to ensuring that
pharmaceutical markets are competitive. We will closely monitor these
markets and continue to evaluate future transactions under the
framework explained here to determine their effect on competition in
the health care market, and, where appropriate, take action to ensure
that any merger or acquisition does not undermine the pharmaceutical
industry's competitiveness.
By direction of the Commission, Commissioner Harbour and
Commissioner Kovacic recused.
Donald S. Clark,
Secretary.
[FR Doc. E9-28336 Filed 11-25-09; 8:45 am]
BILLING CODE 6750-01-P