[Federal Register Volume 73, Number 162 (Wednesday, August 20, 2008)]
[Notices]
[Pages 49207-49209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19213]


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FEDERAL TRADE COMMISSION

[File No. 071 0193]


Sun Pharmaceutical Industries Ltd.; Analysis of Agreement 
Containing Consent Orders 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 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 September 11, 2008.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Sun Pharmaceutical, File No. 071 0193,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, N.W., Washington, D.C. 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ Comments should not include any sensitive personal 
information, such as an individual's Social Security Number; date of 
birth; driver's license number or other state identification number or 
foreign country equivalent; passport number; financial account number; 
or credit or debit card number. Comments also should not include any 
sensitive health information, such as medical records and other 
individually identifiable health information. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions. Comments that do not contain any nonpublic information may 
instead be filed in electronic form by following the instructions on 
the web-based form at (http://secure.commentworks.com/ftc-SunPharmaceutical). To ensure that the Commission considers an 
electronic comment, you must file it on that web-based form.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC website, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC website. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at (http://www.ftc.gov/ftc/privacy.htm).

FOR FURTHER INFORMATION CONTACT: David L. Inglefield, Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-2637.

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 of 
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 August 13, 2008), on the World Wide Web, at (http://www.ftc.gov/os/2008/08/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from Sun Pharmaceutical Industries Ltd. (``Sun'') which is 
designed to remedy the anticompetitive effects of the acquisition of 
Taro Pharmaceutical Industries Ltd. (``Taro'') by Sun. Under the terms 
of the proposed Consent Agreement, Sun is required to divest all of 
Sun's rights and assets necessary to manufacture and market: (1) 
generic immediate-release carbamazepine tablets; (2) generic chewable 
carbamazepine tablets; and (3) generic extended-release carbamazepine 
tablets to Torrent Pharmaceuticals Ltd. (``Torrent'').
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and the comments received, and will decide 
whether it should withdraw from the proposed Consent Agreement, modify 
it, or make final the Decision and Order (``Order'').
    Pursuant to an Agreement of Merger executed on May 18, 2007, Sun 
proposed to acquire all of the issued and outstanding shares of Taro in 
a transaction then valued at approximately $454 million. In the event 
that agreement has been properly terminated, as Taro claims, Sun 
intends to acquire controlling interest in Taro via an Option Agreement 
executed at the time of the merger agreement and/or via a tender offer. 
The Commission's Complaint alleges that the proposed

[[Page 49208]]

acquisition, if consummated, would violate Section 7 of the Clayton 
Act, as amended, 15 U.S.C. Sec.  18, and Section 5 of the Federal Trade 
Commission Act, as amended, 15 U.S.C. Sec.  45, by lessening 
competition in the U.S. markets for the manufacture and sale of generic 
immediate-release carbamazepine tablets and chewable carbamazepine 
tablets, and in the research, development, manufacture and sale of 
extended-release carbamazepine tablets (collectively, the 
``Products''). The proposed Consent Agreement will remedy the alleged 
violations by replacing the lost competition that would result from the 
acquisition in each of these markets.
    Sun, headquartered in Mumbai, India, is a leading developer, 
manufacturer, marketer, and distributor of niche pharmaceuticals in its 
home country and active pharmaceutical ingredients (APIs'') and generic 
drugs worldwide. Sun is intent on growing its U.S. generic drugs 
business and sells generic pharmaceuticals in the United States through 
wholly-owned Caraco Pharmaceutical Laboratories Ltd. Taro, 
headquartered in Israel, also develops and manufactures generic 
pharmaceutical products, primarily for sale in the United States.

The Products and Structure of the Markets

    The proposed acquisition of Taro by Sun would increase Sun's 
worldwide position in generic pharmaceuticals and augment Sun's 
pipeline of future generic products. Sun and Taro overlap in a number 
of generic pharmaceutical markets, and if consummated, the transaction 
likely would lead to anticompetitive effects in the markets for three 
different forms of carbamazepine. Carbamazepine is an anticonvulsant 
that is used primarily as an anti-epileptic drug. It is taken daily, 
either alone or in combination with other drugs, to prevent and control 
seizures.
    The transaction would reduce the number of competing generic 
suppliers in the overlap markets. The number of generic suppliers has a 
direct and substantial effect on generic pricing as each additional 
generic supplier can have a competitive impact on the market. Because 
there are at least two generic equivalents for each of the products at 
issue, the branded versions no longer significantly constrain the price 
of the generic drugs.
    Generic immediate-release carbamazepine tablets are AB-rated 
generic versions of Novartis's Tegratol[reg]. In this market, Taro is 
the leading supplier with half the market. Teva Pharmaceutical 
Industries Ltd. (``Teva'') follows with more than a quarter of the 
market, and Sun's Caraco is the third-leading supplier with a share of 
about 18 percent. The only other supplier currently in the market is 
Apotex.
    Generic chewable carbamazepine tablets are a chewable form of the 
anticonvulsant that carry the same label and indications as the 
immediate-release tablets. They are prescribed in the same way as the 
immediate-release products, but come in a more convenient dosing form, 
which makes them better-suited for pediatric, geriatric, and other 
patients who may have difficulty swallowing pills. With a market share 
of 65 percent, Teva is the leading seller of the generic chewable 
carbamazepine tablets in 2007, followed by Taro with a share of about 
31 percent and Sun, with a share of only 4 percent in 2007. Cadista, 
the only other approved supplier of generic chewable carbamazepine 
tablets, is not supplying the product currently.
    Sun and Taro are the only companies that have applied for Food and 
Drug Administration (``FDA'') approval of generic versions of 
Novartis's Tegretol[reg]-XR extended-release carbamazapine tablets. 
This extended-release formulation of the drug is indicated for the same 
uses as the immediate release products but offers the added convenience 
of a less frequent dosing regimen.

Entry

    Entry into the markets for the manufacture and sale of any of these 
three carbamazepine products would not be timely, likely or sufficient 
in its magnitude, character, and scope to deter or counteract the 
anticompetitive effects of the acquisition. Entry would not take place 
in a timely manner because the combination of generic drug development 
times and FDA drug approval requirements takes at least two years. 
Entry would not be likely because the relevant markets are relatively 
small and in decline, so the limited sales opportunities available to a 
new entrant are likely insufficient to warrant the time and investment 
necessary to enter.

Competitive Effects

    The proposed acquisition would cause significant anticompetitive 
harm to consumers in the U.S. markets for the manufacture and sale of 
generic immediate-release carbamazepine tablets, generic chewable 
carbamazepine tablets, and generic extended-release carbamazepine 
tablets. In generic pharmaceutical markets, pricing is heavily 
influenced by the number of competitors that participate in a given 
market. Both empirical research and the Commission's many 
investigations into generic drug competition confirm that finding. 
Here, the evidence shows that, given the small number of suppliers or 
prospective suppliers in the relevant markets, the prices of the 
generic pharmaceutical products at issue decrease with the entry of 
each additional competitor.
    Among currently-marketed products, the acquisition would reduce the 
number of firms producing generic chewable carbamazepine tablets from 
three to two, with Teva being the only remaining competitor (at least 
until Cadista is able to re-enter the market). Similarly, the proposed 
transaction would reduce from four to three the number of firms 
remaining in the immediate-release carbamazepine tablet market, leaving 
Teva as the only other significant player. In the market for generic 
versions of extended-release carbamazepine tablets, the merging parties 
are the only two firms in the process of entering, so the proposed 
transaction likely would eliminate the generic competition that would 
otherwise exist in that market when the products are introduced.
    As the market share information suggests, the proposed transaction 
would eliminate one of a small number of suppliers in the markets for 
two currently-marketed generic carbamazepine products, with the likely 
result that prices would increase above current levels. For extended-
release generic carbamazepine, the consolidation would result in a 
merger to monopoly, with the likely result that prices would be higher 
than they would be without the transaction and both companies had 
entered independently.
    The competitive concerns can be characterized as both unilateral 
and coordinated in nature. The homogenous nature of the products 
involved, the minimal incentives to deviate, and the relatively 
predictable prospects of gaining new business all indicate that the 
firms in the market will find it profitable to coordinate their 
pricing. The impact that a reduction in the number of firms would have 
on pricing can also be explained in terms of unilateral effects, as the 
likelihood that the merging parties would be the first and second 
choices in a significant number of bidding situations is enhanced where 
the number of firms participating in the market decreases 
substantially.

The Consent Agreement

    The proposed Consent Agreement effectively remedies the proposed 
acquisition's anticompetitive effects in

[[Page 49209]]

the relevant product markets. Pursuant to the Consent Agreement, Sun is 
required to divest all of its rights and assets related to the Products 
to a Commission-approved acquirer no later than the earlier of ten (10) 
days after the acquisition occurs or ten (10) days after the 
Commission's Order becomes final. Specifically, the proposed Consent 
Agreement requires that Sun divest its assets in the Products to 
Torrent Pharmaceutical Limited (``Torrent'').
    The acquirer of the divested assets must receive the prior approval 
of the Commission. The Commission's goal in evaluating a possible 
purchaser of divested assets is to maintain the competitive environment 
that existed prior to the acquisition. A proposed acquirer of divested 
assets must not itself present competitive problems.
    Torrent, a growing generic manufacturer, headquartered in India, is 
particularly well-positioned to manufacture and market its acquired 
products and compete effectively in those markets. Currently, Torrent 
sells generic pharmaceuticals in the United States but none of the 
relevant products, and therefore its acquisition of the relevant 
products would not raise independent competitive concerns. Torrent has 
numerous Abbreviated New Drug Applications (ANDAs'') pending approval 
at the FDA, and has the resources, capabilities, reputation, and 
experience in marketing generic products, as well as a central focus on 
rapidly growing its U.S. generic drugs business, necessary to 
expeditiously replicate the competition that would be lost with the 
proposed acquisition.
    If the Commission determines that Torrent is not an acceptable 
acquirer of the assets to be divested, or that the manner of the 
divestitures to Torrent is not acceptable, Sun must unwind the sale and 
divest the assets within six (6) months of the date the Order becomes 
final to another Commission-approved acquirer. If the parties fail to 
divest within six (6) months, the Commission may appoint a trustee to 
divest the Products.
    The proposed remedy contains several provisions to ensure that the 
divestitures are successful. The Order requires Sun to provide 
transitional services to enable the Commission-approved acquirer to 
obtain all of the necessary approvals from the FDA. These transitional 
services include technology transfer assistance to manufacture the 
Products in substantially the same manner and quality employed or 
achieved by Sun.
    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 Order or to modify its terms in 
any way.
    By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. E8-19213 Filed 8-19-08; 8:45 am]
BILLING CODE 6750-01-S