• On April 22, the FTC filed a petition with the Court of Appeals for the Eleventh Circuit, in Atlanta, Georgia, requesting that the Court vacate its March 8, 2005 decision in the matter of FTC v. Schering-Plough Corporation and re-hear the case en banc. In April 2001, the FTC filed an administrative complaint against Schering-Plough Corporation, Upsher Smith Laboratories and American Home Products (“AHP”) alleging that they had entered into anticompetitive agreements aimed at keeping a low-cost generic version of K-Dur 20 potassium chloride supplement off the U.S. market. AHP settled with the Commission in April 2002. In July 2002, an administrative law judge issued an initial decision dismissing the FTC’s complaint. The staff appealed this initial decision to the full Commission, which ruled in its favor in December 2003. Schering and Upsher then appealed the case to the Eleventh Circuit, which issued a decision by a three-judge panel reversing the Commission’s ruling and dismissing the charges against the companies.

• On April 22, the staff of the Bureau of Competition advised Stevens Hospital, in Edmonds, Washington, that its purchase of pharmaceuticals to be dispensed to patients treated by its clinic physicians is covered by the Non-Profit Institutions Act (“NPIA”). That statute exempts from the Robinson-Patman Act “purchases of their supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.”

  Stevens is a non-profit hospital that owns a number of clinics. The physicians who work at the clinic are all Stevens employees, and all medical services provided at the hospital and at the clinic are billed under Stevens’ tax identification number. Stevens also maintains liability insurance for the clinics and staff. Stevens currently purchases pharmaceuticals at reduced pricing from a drug wholesaler and uses these pharmaceuticals for its hospitalized patients for inpatient needs, for periodic discharge prescriptions, and to supply its emergency department. Stevens asked for an opinion on whether it also can use these pharmaceuticals purchased pursuant to the NPIA for patients receiving treatment from its clinic physicians. The staff opinion letter, signed by David Pender, Acting Assistant Director of the Health Care Services and Products Division of the FTC’s Bureau of Competition, concluded that pharmaceuticals used in the ways described in the request letter would be purchased for Stevens’ “own use” within the meaning of the statute.

• On April 19, the Commission approved a petition from Aventis S.A. (“Aventis”), the successor company to Hoechst AG and Rhone-Poulenc S.A. (RP) (the “respondents”), to reopen and modify a final consent order regarding the 1999 merger of the two companies. Under the terms of the Commission order, which became final on January 20, 2000, Aventis was required to reduce to five percent its holdings in Rhodia, a French-based chemical company in which RP held a 67 percent share at the time of the merger. The respondents were given approximately five years to complete their sale of Rhodia shares. Commission approval of petition to reopen and modify final order: The Commission has approved a petition from Aventis S.A., the successor company to Hoechst AG and Rhone-Poulenc S.A. (RP) (the respondents), to reopen and modify a final consent order regarding the 1999 merger of the two companies. Under the terms of the Commission order, which became final on January 20, 2000, Aventis was required to reduce to five percent its holdings in Rhodia, a French-based chemical company in which RP held a 67 percent share at the time of the merger. The respondents were given approximately five years to complete their sale of Rhodia shares.

  In the petition, announced by the FTC on December 21, 2004, Aventis requested that the Commission reopen the final order to modify and set aside certain provisions regarding the sale of Aventis’ holdings of shares in Rhodia. The Commission has determined that changed factual circumstances have eliminated the continuing need for these provisions. Kuwait Petroleum has sold its shares in Celanese, and thus severed the common link between Celanese and Rhodia that was the basis of the Commission’s original concern. Through this action, the FTC has approved Aventis’ request. The Commission vote granting the petition to reopen and modify the decision and order was 4-0-1, with Chairman Deborah Platt Majoras recused.

• Commission approval of final consent order, hold separate agreement, and hold separate trustee: The Commission has approved and issued a final consent order in the matter concerning Cytec Industries, Inc.’s (“Cytec”) acquisition of the Surface Specialties Group (“SurfaceSpecialties”) of UCB, S.A. Under the terms of the consent order, Cytec must divest, by August 27, 2005, assets related to the research, manufacture, and sale of amino resins to a buyer approved by the Commission. As previously announced on March 1, 2005, the Commission issued an order requiring Cytec to hold and operate those assets separately until they are divested, and appointed Richard M. Klein as the hold separate trustee to monitor Cytec’s performance of its obligations under that order. In addition to issuing the order, the Commission has approved a hold separate trustee agreement between Cytec and Klein. The Commission votes approving the final consent order and hold separate trustee agreement were 5-0.

• On April 7, the Commission authorized the submission of a response to the U.S. Food and Drug Administration (“FDA”) regarding a citizen petition filed with the FDA by IVAX Pharmaceuticals, Inc. (“IVAX”) on January 5, 2005. The petition relates to IVAX’s attempt to gain approval for, and market a generic version of, Merck & Co.’s drug Zocor, which contains the active ingredient simvastatin and is used to treat high cholesterol. (See lead article in May 2005 Antitrust Law Blog.)

• Under the terms of a consent order with the FTC announced on April 5 a Chicago-area physicians’ group agreed to stop collectively bargaining on behalf of its members, as such joint negotiations allegedly led to reduced competition and higher prices paid by health plans and other payors to the group’s salaried and independent doctors.

  The order settles the FTC’s complaint against Evanston Northwestern Healthcare Corporation (“ENH”) and ENH Medical Group, Inc. (“ENH Medical Group”). The allegations against the respondents are contained in Count III of the Commission’s larger complaint concerning ENH’s acquisition of Highland Park Hospital in Highland Park, Illinois. Counts I and II of the complaint, which charge that the hospital acquisition was illegal and anticompetitive, have not been settled. A hearing on the merits of these charges is currently pending before an independent administrative law judge.

  According to the Commission’s complaint, the respondent violated Section 5 of the FTC Act by facilitating and implementing agreements among rival physicians to fix prices and other terms of dealing with health plans and other third-party payors, and by refusing to deal with such payors except on jointly determined terms. There was no physician practice integration that may have led to increased efficiency, the complaint states. As a result, the FTC contends, ENH Medical Group deprived payors, employers, and individuals of the benefits of physician competition. By eliminating this competition, ENH Medical Group was able to increase the prices that payors paid to the salaried and independent physicians in the Group.

  The consent order settles all allegations in Count III of the Commission’s complaint against ENH and ENH Medical Group. It bars the respondent from entering into or facilitating any agreement between or among physicians: 1) to negotiate with payors on any physician’s behalf; 2) to deal, not to deal, or threaten not to deal with payors; 3) to designate the terms on which to deal with any payor; or 4) to refuse to deal individually with any payor, or to deal with any payor only through the respondent’s arrangements.

  The Commission vote to place the consent order on the public record for comment and publish a copy in the Federal Register was 4-0-1, with Chairman Deborah Platt Majoras not participating. The Commission is accepting comments on the order for 30 days, until May 2, 2005, after which it will decide whether to make it final.

• On April 5, the Commission has approved a proposed divestiture from Enterprise Products Partners L.P. (“Enterprise”) and Dan L. Duncan related to the FTC’s decision and order concerning the merger of Enterprise and GulfTerra Energy Partners. Under the terms of the order, Enterprise is required to divest by March 31, 2005, either its 100 percent interest in the High Island Offshore System and its accompanying East Breaks lateral or its 50 percent interest in the Starfish Pipeline Company, LLC, owner of the Stingray/Triton pipeline system in the Western Gulf of Mexico offshore. Through a petition filed in January 2005, Enterprise and Duncan requested Commission approval to divest Enterprise’s Starfish Pipeline Interest to MarkWest Energy Partners, L.P. (“MarkWest”) to meet the terms of the order. The Commission vote to approve the proposed divestiture to MarkWest was 5-0.

• On April 4, Federal Trade Commission Chairman Deborah Platt Majoras issued the agency’s annual report at the Spring Meeting of the American Bar Association’s Section of Antitrust Law in Washington, DC. The report, entitled “The FTC in 2005: Standing Up for Consumers and Competition,” is available on the Commission’s Web site and includes sections on the agency’s competition and consumer protection missions, as well as the policy tools used to coordinate its law enforcement and international outreach efforts. The report highlights the symmetry and synergy between the FTC’s competition and consumer protection missions, calling them “two parts of a greater whole, complementing each other in maximizing benefits for consumers.”

Authored by:
Robert W. Doyle, Jr.
202-218-0030
rdoyle@sheppardmullin.com