Boehringer Ingelheim will sell five of its animal health products in the U.S. to settle a complaint by the Federal Trade Commission (FTC) that its planned swap of businesses with Sanofi would be anticompetitive.
The FTC, which announced the decision yesterday, said Boehringer Ingelheim has agreed to a proposed consent order, through which it will divest itself of three types of animal vaccines to Eli Lilly and its Elanco Animal Health division—as well as sell off two categories of parasite control products to Bayer.
The proposed consent order gives Elanco control of Boehringer Ingelheim’s canine vaccines, feline vaccines, and rabies vaccines. Without the divestiture, the FTC said, the number of suppliers of all three types of vaccines would have shrunk from four to three—Merck & Co., Zoetis, and the Boehringer Ingelheim–Sanofi combination.
Bayer will be given Boehringer Ingelheim’s products to prevent and control outbreaks of parasites in cattle and sheep. The sell-off will maintain at three the number of suppliers of the cattle parasite control products, known as macrocyclic lactones—and prevent the Boehringer Ingelheim–Sanofi combination from obtaining a 65% market share in the category, with Zoetis the third major supplier, according to the FTC.
The agency said the Boehringer Ingelheim–Sanofi combination would have held a more than 78% market share of products to prevent and control outbreaks of parasites in sheep absent the divestiture.
Under the proposed consent order, Boehringer Ingelheim must provide technical assistance and other unspecified transition services that will enable Elanco and Bayer to independently manufacture and sell the divested products. The FTC order also includes an asset maintenance order and it appoints a monitor to oversee the divestiture process.
The FTC agreed to lodge its complaint against Boehringer Ingelheim—as well as accept the proposed consent order resolving the issues raised in that complaint—by a 3 to 0 vote. The complaint alleged that the asset swap could have led to higher prices and reduced service in the affected product categories, as well as raise the likelihood of coordinated interaction between Boehringer Ingelheim and Sanofi.
“The effects of this acquisition, if consummated, may be to substantially lessen competition and to tend to create a monopoly in the relevant markets,” the complaint stated.
The proposed consent order will undergo a 30-day comment period through January 27, 2017, after which the FTC will decide on finalizing the agreement. Violations of final consent orders are subject to civil penalties of $40,000 per day.
Boehringer Ingelheim’s decision comes a year to the month that it agreed to exchange its €6.7 billion $7 billion) consumer healthcare (CHC) business with Sanofi’s €11.4 billion ($11.9 billion) animal health business (Merial). Under the deal, Boehringer Ingelheim also agreed to pay Sanofi €4.7 billion ($4.9 billion) in cash. On June 27, Boehringer Ingelheim disclosed that the companies signed contracts to carry out the asset swap.