Big pharmaceutical deals under scrutiny

A day after generic drug giant Teva Pharmaceutical Industries Ltd ("Teva") announced its intentions to buy out its rival and competitor Barr Pharmaceuticals Inc ("Barr") for $8 billion, Roche Holdings AG ("Roche") on 14 July 2008 revealed its intentions to purchase brand pharmaceutical company Genentech Inc ("Genentech"), for $44 billion. These two transactions could draw heavy criticism from competition regulators in both the U.S. and E.U.  The antitrust regulators will in essence be looking for signs of collusion or convergence between the merging entities and any concerns that the merger could harm the generic and brand drug industries in which they are leading players.

Roche already owns 55.9% of the U.S. biotechnology firm; Genentech and may not need to provide the U.S. Federal Trade Commission with filings under the Hart Scott-Rodino Act, however the scale of the merger could possibly trigger an inquiry.  The Teva-Barr merger is likely to come under scrutiny from the U.S. Department of Justice, which will seek to ensure that the merger will not seriously consolidate the market for cheaper generic medications. Both companies market generic versions of Merck &Co, which raises the question as to whether the merger would harm competition in the market for the osteoporosis medication.

Roche on the other hand has proposed to purchase the remaining portion of Genentech for $89 per share in cash, the two companies have stated that the merger improve their innovation by permitting them to combine their diverse research approaches while sharing their intellectual property, technologies and other assets.

The Netherlands' Competition Authority launches inquiry into health-care sector

The Netherlands' Competition Authority ("the NCA") has launched an extensive inquiry of a merger between ZorgAccent Foundation, Noord West Twente Home Care Foundation, Sutfene Carinova Leiboom Groep and Vérian Foundation. The NCA is primarily concerned that this merger could hamper competition in the market for household assistance as well as individual, maternity and nursing home care.

According to the NCA, the merger would essentially remove one of the largest competitors in the sector for household assistance in various Dutch municipalities, as the merger has the potential to expand its activities in the area of household assistance. The merging companies control approximately 60% of the market for personal care and 80% of the market for maternity care in the same region where they have very few competitors and thus face very little competition.

The NCA is investigating why other companies have failed to enter the market and compete against the abovementioned players. The NCA has indicated that the nursing home providers face barriers to entering the market, which constitutes anti-competitive conduct.  The NCA intends to come down hard on suspected collusion in the health-care market. In 2005, the NCA, uncovered one of the largest cartels, charging 344 construction companies with competition violations, which amounts to over €100 million in fines.

Both articles sourced from Webber Wentzel Newsletter, Monday 28 July 2008