On February 19, 2016, the Federal Trade Commission (“FTC”) announced a proposed consent agreement with Hikma Pharmaceuticals PLC (“Hikma”) to settle charges that Hikma’s acquisition of assets from Ben Venue Laboratories, Inc. (“Ben Venue”), a subsidiary of C.H. Boehringer Sohn AG & Co. KG (“Boehringer”), would be anticompetitive.1  Under the proposed settlement, Hikma is required to divest five generic injectable drug assets to Amphastar Pharmaceuticals, Inc.

Although Boehringer holds U.S. Food and Drug Administration (“FDA”) Abbreviated New Drug Applications (“ANDA”), Boehringer’s Ben Venue subsidiary had ceased manufacturing and currently was not selling any of the five relevant products.2  In two of the five relevant product markets, neither party currently supplies a product.  Therefore, this enforcement action highlights the FTC’s willingness to require divestitures to protect future competition even where there is no current competition between the parties.

Background

In October 2013, Boehringer announced that Ben Venue would cease all manufacturing operations, noting that “the company cannot return to sustainable production.”3  The decision was a result of ongoing manufacturing challenges at the Ben Venue facilities in Bedford, Ohio.  The facilities had struggled to remain viable for several years due to quality assurance problems identified by the FDA, prompting a voluntary shutdown in 2011.4  By January 2013, the FDA determined that the facility failed to comply with good manufacturing practice requirements, and Ben Venue entered into an FDA consent decree of permanent injunction requiring the company to take corrective action or cease manufacturing.5

In December 2014, Hikma agreed to acquire from Boehringer substantially all of the assets related to Ben Venue’s generic injectable pharmaceutical products business, including 49 ANDAs and a manufacturing site that has four plants and a research and development center.6  Upon announcing the acquisition, Hikma stated it would “evaluate the potential to partially reactivate the site” in the long-term and transfer certain of Ben Venue’s equipment to Hikma’s other facilities in the short-term.7

The FTC’s proposed settlement requires divestitures in five generic injectable pharmaceutical product markets: acyclovir sodium injection, diltiazem hydrochloride injection, famotidine injection, prochlorperazine edisylate injection, and valproate sodium injection.

  • Acyclovir sodium injection: Neither Hikma nor Boehringer currently manufacture or supply generic acyclovir sodium injections. Boehringer, Fresenius Kabi AG (“Fresenius”), and AuroMedics Pharma LLC (“AuroMedics”) have FDA-approved ANDAs, but only Fresenius and AuroMedics currently supply the market.  The FTC alleges that Hikma and one other firm are likely to enter the market in the near future.  Therefore, the FTC claims the transaction would reduce the number of likely future suppliers from five to four. 8
  • Diltiazem hydrochloride injection: Hikma, Boehringer, Hospira, Inc. (“Hospira”) and Akorn, Inc. (“Akorn”) have FDA-approved ANDAs for diltiazem hydrochloride injection, but Boehringer currently does not supply diltiazem hydrochloride injection. Nevertheless, the FTC alleges that the transaction would reduce the number of future suppliers from four to three.9
  • Famotidine injection: Similarly, there are four FDA-approved ANDAs for famotidine injection: Hikma, Fresenius, Mylan N.V, and Boehringer. Three firms currently supply famotidine injection.  Boehringer ceased supplying the market and had no sales of the product since 2014.  However, the FTC alleges the transaction would reduce the number of future suppliers from four to three.10
  • Prochlorperazine edisylate injection: Neither Hikma nor Boehringer currently supplies prochlorperazine edisylate injection. Heritage Pharmaceuticals Inc. currently is the only supplier of prochlorperazine edisylate injection.  Boehringer had supplied prochlorperazine edisylate injection until it exited the market in mid-2014.  Hikma has an FDA-approved ANDA for prochlorperazine edisylate injection, but currently does not supply the market.  One other firm has a prochlorperazine edisylate injection product in development and anticipates FDA approval in the near future.  Accordingly, the FTC concluded that the transaction would reduce the number of likely future suppliers from four to three.11
  • Valproate sodium injection: Currently, Hikma and Fresenius supply valproate sodium injection. Boehringer has an FDA-approved ANDA, but exited the market in July 2014.  One other firm has a valproate sodium injection product in development and anticipates FDA approval in the near future.  Therefore, the FTC concluded that the transaction would reduce the number of likely future suppliers from four to three.12

Key Takeaways

The proposed settlement seeks to preserve future competition in markets even though either Hikma or Boehringer, or both, are not current suppliers in the markets.  Three issues appear to underpin the FTC’s decision to require divestitures in this matter.

  • First, the FTC had reason to believe that Boehringer was a competitive factor in these markets even though it had ceased manufacturing the products and exited the relevant markets. According to the FTC, absent the transaction, Boehringer would have an incentive to sell its ANDAs to third-party suppliers.13  However, the FTC stopped short of alleging that Boehringer actually had plans to sell its ANDAs to third parties.
  • Second, according to the FTC, where Hikma currently does not supply a relevant product, Hikma “already has an approved ANDA or is likely to soon achieve FDA approval for an ANDA.”14 Therefore, Hikma is a likely entrant in the near future.
  • Third, generic injectable markets are “highly susceptible to supply disruptions caused by the inherent difficulties of producing sterile liquid drugs.”15 In particular, Ben Venue’s manufacturing problems and multiple facility shutdowns resulted in supply shortages and contributed to price increases of several generic injectables at issue in the transaction.16  Therefore, according to the FTC, a reduction in the number of likely future competitors could result in substantial competitive effects.17

Thus, the enforcement action indicates that the FTC aggressively will protect future competition, particularly in markets that are susceptible to supply disruptions.