FTC Challenges Actavis Group's Proposed Acquisition of Abrika
On April 16, the FTC requested Actavis Group’s (“Actavis”) and Abrika Pharmaceuticals, Inc. (“Abrika”) divest all rights and assets needed to make and market generic isradipine capsules to Cobalt Laboratories, Inc. (“Cobalt”) within 10 days of the proposed acquisition. The FTC challenged the terms of the acquisition alleging that the transaction would create a monopoly in the U.S. market for generic isradipine capsules, a drug typically prescribed to patients to lower their blood pressure and also is used to treat hypertension, ischemia, and depression.
Actavis, headquartered in Iceland, is a leading developer, manufacturer, marketer, and distributor of generic pharmaceutical drugs in more than 30 countries, with manufacturing facilities in Europe, the United States, and Asia. Abrika, based in Sunrise, Florida, develops specialty generic pharmaceuticals, including controlled release and immediate release products. Under a merger agreement announced on November 20, 2006, Actavis proposed to acquire all of the voting securities of Abrika for $235 million.
The Commission’s Complaint
Actavis and Abrika are the only two companies selling generic isradipine capsules in the United States, and the acquisition would cause significant harm to consumers in the U.S. market for its manufacture and sale.
The acquisition would eliminate Abrika as a competitor and create a monopoly for Actavis in the market for generic isradipine capsules. A reduction in the number of competitors in the generic isradipine capsules market, from two to one, would allow the merged company to exercise its unilateral market power to increase prices. The FTC contends that entry into the market for generic isradipine capsules would not be timely, likely, or sufficient to deter or counteract the anticompetitive impact of the acquisition as proposed.
Terms of the Consent Order
The FTC has determined that Cobalt is an acceptable acquirer of the generic isradipine capsules assets, as it has experience in distributing and marketing generic drugs in the United States and to date has received FDA approval for nine other generic drugs. In addition, the sale to Cobalt does not raise any new competitive concerns, as Cobalt is not currently in the market for generic isradipine capsules and does not plan to enter. Finally, Cobalt will be able to restore the competition lost in the market for generic isradipine capsules following Actavis’ acquisition of Abrika.
To ensure the divestiture is successful, the order also requires Abrika to transfer its supply arrangement for generic isradipine capsules to Cobalt. Actavis and Abrika will transfer all confidential businesses information related to the product to Cobalt and will provide technical assistance to Cobalt to allow it to sell generic isradipine capsules. Finally, the FTC appointed Denise F. Smart as an interim monitor to oversee the asset transfer and to ensure Actavis and Abrika comply with the terms of the consent order pending the divestiture to Cobalt.
The Commission vote to approve the consent order was 5-0.