Pfizer and Hospira agree to divest 4 drugs to facilitate $16B merger

A consent agreement designed to remedy the anticompetitive effects of Pfizer, Inc.’s $16 billion acquisition of Hospira, Inc. has been proposed by the parties. The agreement would require Pfizer to divest all of its rights and assets related to generic acetylcysteine inhalation solution and all Hospira’s rights and assets related to clindamycin phosphate injection, voriconazole injection, and melphalan hydrochloride injection to Alvogen Group, Inc.

Alvogen is a private, global pharmaceutical corporation that develops, manufacturers, sells, and distributes generic pharmaceuticals in the U.S. and in 33 other countries around the world.

A Federal Trade Commission (FTC) complaint alleged that the proposed merger, if consummated, would violate Section 7 of the Clayton Act, 15 U.S.C. §18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. §45, by reducing the number of current suppliers in the markets for generic acetylcysteine inhalation solution and clindamycin phosphate injection, and reducing the number of future suppliers in the markets for voriconazole injection and melphalan hydrochloride injection.

The Products and Market Shares

The proposed divestitures and their market structures are as follows:

  • Generic acetylcysteine inhalation solution is a mucolytic therapy used to treat certain respiratory disorders. Fresenius Kabi, partnered with Gland Pharma Ltd. and Pfizer; Hospira; and American Regent, Inc. supply generic acetylcysteine inhalation solution in the U.S. The brand version of this product, Mucomyst®, is no longer available. Fresenius/Gland/Pfizer is the market leader with a 69 percent share. Hospira has a 22 percent share.
  • Clindamycin phosphate injection is an antibiotic used to treat lung, skin, blood, bone, joint, and gynecological infections in hospitals. Pfizer, Hospira, Sagent Pharmaceuticals, and Fresenius Kabi supply the product in the U.S. While Pfizer’s clindamycin phosphate product is the brand version, the price of Pfizer’s product is competitive with the generic products. Customers, therefore, can play the brand and the generic products against each other to negotiate prices. Pfizer and Hospira have a combined market share of more than 80 percent.
  • Voriconazole injection is an antifungal medication used to treat significant fungal infections in hospitals. Pfizer currently sells its Vfend® brand voriconazole injection product priced competitively with the only generic version in the U.S., which is offered by Sandoz. Hospira is one of a limited number of suppliers capable of entering the voriconazole injection market in the near future.
  • Melphalan hydrochloride injection is a chemotherapy agent used to treat multiple myeloma and ovarian cancer. There are currently two melphalan hydrochloride injection products available in the U.S.: the brand version, which was originally developed and marketed by Glaxo Smith Kline and now supplied by ApoPharma USA, Inc., and the generic version, sold by Mylan N.V.  ApoPharma prices its brand version of the product competitively with the generic version offered by Mylan. Pfizer and Hospira are developing melphalan hydrochloride injection products, and are two of a limited number of suppliers capable of entering the market in the near future.

Elimination of Competition

According to the FTC, the proposed merger would eliminate the current competition in the market for generic acetylcysteine inhalation solution and clindamycin phosphate solution, leading to higher prices. In addition, the merger would eliminate an additional independent entrant in the currently concentrated markets for voriconazole injection and melphalan hydrochloride injection, which would have enabled customers to negotiate lower prices.

Consent Agreement

The details of the consent agreement are as follows:

  • Alvogen will acquire Pfizer’s generic acetylcysteine inhalation and stream of revenue associated with the product and will assume Pfizer’s role in the contractual relationships with the third parties.
  • Pfizer/Hospira will supply Alvogen with the clindamycin phosphate injection products for three years while the company transfers the manufacturing technology to Alvogen or its designee.
  • Pfizer/Hospira will transfer the third-party development and contract manufacturing agreements for voriconazole injection and melphalan hydrochloride injection to Alvogen.
  • Pfizer/Hospira to provide transitional services to Alvogen to assist it in establishing its manufacturing capabilities and securing all of the necessary FDA approvals.
  • If the FTC determines that Alvogen is not an acceptable acquirer, or that the manner of the divestitures is not acceptable, the proposed agreement requires the parties to unwind the sale of rights to Alvogen and then divest the products to an FTC-approved acquirer within six months of the date the agreement becomes final.

Public comments on the proposed consent agreement will be accepted for 30 days. After 30 days, the FTC will again evaluate the proposed consent agreement in light of the comments received, and make a final decision as to whether it should withdraw from the proposed consent agreement or make a final decision and order.