Roche Holding Ltd.; Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 971-0103]

Roche Holding Ltd.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

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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 that accompanies the consent agreement 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 May 4, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: William Baer or Christina Perez, FTC/

H-374, Washington, DC 20580. (202) 326-2932 or 326-2048.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's 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 sixty (60) 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 February 25, 1998), on the World Wide Web, at ``http://

www.ftc.gov/os/actions/htm.'' A paper copy can be obtained from the FTC

Public Reference Room, Room H-130, Sixth Street and Pennsylvania

Avenue, NW., Washington, D.C. 20580, either in person or by calling

(202) 326-3627. Public comment is invited. Such comments or views will

be considered by the Commission and will be available for inspection

and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR

4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an Agreement Containing a Proposed Consent Order

(``Order'') from Roche Holding Ltd (``Roche''), which remedies the

anticompetitive effects of Roche's acquisition of Corange Limited.

Corange is the parent company of Boehringer Mannheim (``BM''). Both

Roche and BM manufacture a wide array of pharmaceutical and diagnostic

instruments and reagents. The proposed Order remedies the acquisition's

anticompetitive effects by requiring Roche to divest BM's cardiac

thrombolytic agent and drugs of abuse testing (``DAT'') reagent assets

as viable, on-going product lines. Roche has entered into an agreement

to divest to Centocor, Inc. (``Centocor'') BM's cardiac thrombolytic

agent assets.

The proposed Order has been placed on the public record for sixty

(60) days for reception of comments by interested persons. Public

comments regarding the proposed divestiture of the United States and

Canadian Retavase businesses to Centocor, Inc. will be considered with

other comments on the proposed Order. Comments received during this

period will become part of the public record. After sixty (60) days,

the Commission will review the agreement and the comments received and

will decide whether it should withdraw from the agreement or make final

the agreement's proposed Order.

Pursuant to a Stock Purchase Agreement signed May 24, 1997, Roche

agreed to purchase 100% of the outstanding voting stock of Corange for

approximately $11 billion. The proposed Complaint alleges that the

acquisition violates Section 7 of the Clayton Act, as amended, 15

U.S.C. 18, and section 5 of the FTC Act, as amended, 15 U.S.C. 45, in

the markets for the research, development, manufacture and sale of

cardiac thrombolytic agents and workplace DAT reagents.

Cardiac thrombolytic agents are pharmaceuticals used to treat heart

attacks by dissolving blood clots in the blood vessels of the heart.

Angioplasty, the only other method of treating heart attacks, is a very

expensive surgical procedure that is not available at many hospitals in

the United States. As a result, there are no competitive substitutes

for cardiac thrombolytic agents.

The U.S. cardiac thrombolytic agents market is highly concentrated.

According to studies published in the New England Journal of Medicine,

the safest and most effective cardiac thrombolytic agents are BM's

Retavase and Genetech's Activase. Roche owns 68% of Genetech's stock.

As a result of these studies, it appears that the only other cardiac

thrombolytic agent approved for use in the United States,

Streptokinase, is not an acceptable substitute for most U.S.

physicians. Also, because of the lengthy development time involved in

entering the cardiac thrombolytic agent market, no other company is

expected to enter the United States market for at least two years. For

these reasons, the acquisition, if consummated, would lead to the

elimination of the only head-to-head competition of safe and effective

cardiac thrombolytic agents, and therefore, is likely to lead to higher

prices.

DAT reagents are chemical antibodies that are combined with a urine

specimen to detect the presence of an illegal drug. Workplace DAT is

pre-employment, random, post-accident and reasonable cause testing of

employees in law enforcement, federal government and private industry

for safety and security reasons. It is conducted at commercial

laboratories with high-volume dedicated instruments that can only use

workplace DAT reagents. DAT conducted in hospitals is very different

from workplace DAT. Hospitals use medium- to low-volume instruments

that can conduct a wide-variety of tests and use a wide variety of

reagents that cannot be used economically for workplace DAT.

The workplace market of DAT reagents is highly concentrated and new

entry would be neither timely nor sufficient. A new producer of

workplace DAT reagents would find it very difficult to develop a full

line of workplace DAT reagents, as well as gain customer acceptance

within two years. Roche and BM are two of only four suppliers of

workplace DAT reagents in the United States. By eliminating the

competition between two of the top three competitors in this highly

concentrated market, the proposed acquisition would enhance the

likelihood of coordinated interaction between or among the remaining

firms in the market, increasing the likelihood that consumers in the

United States would be forced to pay higher prices for workplace DAT

reagents.

The proposed Order remedies the anticompetitive effects in the

cardiac thrombolytic agent market by requiring Roche to divest all of

the assets relating to BM's United States and Canadian Retavase

businesses to Centocor, Inc. or another Commission-approved buyer.

Centocor is an established biotechnology company that currently sells

ReoPro. ReoPro is a drug that is given to a patient after a heart

attack to prevent new blood clots from forming. Because this is a

complementary product to Retavase, it is anticipated that Centocor will

achieve significant marketing synergies if it is allowed to purchase

the Retavase businesses. Although Centocor is not one of the large,

well-known pharmaceutical

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companies, it is well-respected by the medical community and has a

significant capital base to support its proposed acquisition of the

Retavase assets. In the event that Roche does not sell these assets to

Centocor or another Commission-approved purchaser within ninety days of

the Order's becoming final, a ``crown jewel'' provision in the Order

permits a Commission-appointed trustee to divest the world-wide rights

to Retavase.

The proposed Order also effectively remedies the proposed

transaction's anticompetitive effects in the workplace DAT reagent

market by requiring Roche to divest BM's DAT reagents and grant a non-

exclusive license to all other Cloned Enzyme Donor Immuno-Assay

(``CEDIA'') reagents in the United States, including, but not limited

to, reagents used for therapeutic drug monitoring, thyroid analysis,

testing for anemia, and hormone testing. In the event Roche fails to

divest and license these assets within two months of the Order's

becoming final, the proposed Order contains a ``crown jewel'' provision

that allows a Commission-appointed trustee to divest all of BM's CEDIA

reagents.

The proposed Order also requires Roche to provide substantial

assistance to each of the acquirers so that they can each compete

effectively in the relevant markets. First, Roche must contract

manufacture a supply of the divested products for the time period it

takes for each acquirer to establish its own manufacturing processes

and obtain its own FDA approvals to manufacture and sell Retavase and

DAT reagents in the United States. Second, Roche must provide technical

assistance and advice to assist both acquirers in their efforts to

begin manufacturing the divested products. Finally, the Order provides

the Retavase acquirer and the reagent acquirer the ability to hire

former BM employees associated with the marketing or sales of Retavase

or CEDIA reagents, respectively.

In order to facilitate the smooth transfer of assets and ensure

that the acquirers will get the assistance necessary to independently

manufacture the products, the proposed Order also provides for the

appointment of an interim trustee. The interm trustee will serve until

the acquirers have received all necessary FDA approvals to manufacture

and sell the divested products.

Because it is becoming essential for a DAT reagents supplier to

also provide its customers with DAT analyzers, the proposed Order

requires Roche to terminate BM's exclusive distribution arrangement

with Hitachi Ltd., and to inform Hitachi, within ten days of divesting

the DAT reagents, that, as to the reagent acquirer, it waives all

exclusivity provisions of BM's agreement with Hitachi.

In addition, because of pending litigation between Genentech and

BM, the proposed Order requires Roche to provide: (1) Full access to,

and cooperation from, former BM employees and agents who have knowledge

about the disputed patents; (2) access to any documents that may be

relevant to the dispute; and (3) reimbursement for half of all the

legal expenses relating to the dispute. In addition, Roche is

prohibited from disclosing or otherwise making available to Genentech

any information relating to the patent dispute without the prior

written consent of the Retavase acquirer.

The Order also requires Roche to provide to the Commission a report

of compliance with the divestiture and licensing provisions of the

Order within sixty (60) days following the date the Order becomes

final, and every ninety (90) days thereafter until Roche has completed

the divestitures and licensing. The Order also requires Roche to notify

the Commission at least thirty (30) days prior to any change in the

structure of Roche that may affect compliance with the Order.

The purpose of this analysis is to facilitate public comment on the

proposed Order, and it is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 98-5534 Filed 3-3-98; 8:45 am]

BILLING CODE 6750-01-M