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Mylan Agrees to Divest Seven Products, Including Three Pipeline Products, to Clear FTC Hurdle in Its $27 Billion Tender Offer Bid for Perrigo

The Federal Trade Commission (“FTC”) yesterday concluded its antitrust review of  Mylan N.V.’s (“Mylan”)  proposed acquisition of Perrigo Company plc (“Perrigo”) by entering into a proposed consent judgment that would require Mylan to divest seven generic products, including three future pipeline products, to Alvogen Group Inc. (“Alvogen”).  The divested products treat a variety of conditions, including Parkinson’s, herpes, constipation, acne, type 2 diabetes, hypothyroidism, motion sickness, and pain management. After FTC clearance, Mylan’s remaining hurdle to completing the acquisition, which Perrigo’s management continues to oppose, is to gain Perrigo’s shareholders’ approval. The settlement is yet another example of the FTC’s willingness to tinker with the future by insisting on pipeline divestitures to alleviate even the potential for future competitive concerns. 

The FTC’s analysis focused on seven overlaps facing some limited competitive constraints, including three pipeline overlaps that would influence future competition. Those affected pipeline markets at issue include:

  • Acyclovir 5% ointment, indicated to slow herpes virus growth, faces generic competition from Mylan and two other manufacturers.  The FTC expects Perrigo to enter in the near future with a pipeline ointment product because of Perrigo’s expertise in topical delivery.
  • Hydromorphone hydrochloride is an extended-release tablet that treats severe pain for narcotic-tolerant patients. Perrigo competes with another generic and an authorized generic, but the FTC believes Mylan is likely to enter due to its pipeline experience with pain management medications
  • Scopolamine transdermal patch treats nausea and vomiting related to motion sickness and post-surgery or anesthesia recovery. According to the FTC, Perrigo is the only generic manufacturer competing with Novartis’s branded Transderm Scop product, but Mylan is expected to enter given its niche transdermal patch experience and expertise.

In the complaint that the FTC issued along with the proposed consent judgment, the Commission alleged that the potential reduction in competition in these markets, and the potential reduction in the other four markets in which Perrigo and Mylan already compete, would inevitably increase the likelihood that the combined firm would be able to unilaterally raise prices and encourage coordination between other competitors in these seven markets. Plus, according to the complaint, entry by other competitors “would not be timely, likely, or sufficient” to negate the potential anticompetitive effects of the deal, in part due to Perrigo and Mylan’s stated expertise in topical and transdermal delivery solutions.

As we have noted in recent advisories discussing FTC pharmaceutical acquisition settlements, the critical takeaway is the FTC’s continuing focus on pipeline divestitures as a structural remedy to cure anticipated future competitive concerns.  Here, the Commission reached forward, yet again, to show the importance it places on the markets for pipeline drug products and their expected impact on prices in current pharmaceutical markets.  Interestingly, too, is that two of the three pipeline markets (acyclovir and hydromorphone hydrochloride) already face robust competition from three generic manufacturers, but the incremental potential competition of a fourth entrant was sufficient for the FTC to require divestiture.  This not only shows that the agency is willing to reach into the future, but also that its reach extends to fairly competitive pharmaceutical markets. 

The result here is similar to settlements the FTC reached with Endo-Boca, Medtronic-Covidien, Novartis-GSK, Pfizer-Hospira, and several others in recent years. This renewed focus on products still in clinical development indicates that the FTC shows no signs of stopping its efforts to augment future competition, rather than simply preserving or affecting current competition.

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