FTC Requires Grifols S.A. to Divest Assets as Condition of Acquiring Biotest US Corporation
The Federal Trade Commission will require Spain-based global healthcare company Grifols S.A. to divest blood plasma collection centers in three U.S. cities, among other conditions, as part of a settlement resolving charges that Grifols’ acquisition of Florida-based Biotest US Corporation is anticompetitive and violates federal antitrust law.
The products at issue, competition concerns and economic implications
The complaint alleges that, as proposed, the acquisition would harm competition in the markets for collection of human blood plasma in Lincoln, Nebraska, Augusta, Georgia, and Youngstown, Ohio. Grifols and Biotest US are the only companies that operate plasma collection centers in these cities, and, without a remedy, the merger would result in a merger-to-monopoly in these cities. Under the terms of the proposed settlement, Grifols will divest its plasma collection centers in these three cities to KedPlasma, which is a subsidiary of Kedrion Biopharma Inc., a leading manufacturer of protein products and the fifth-largest producer of plasma proteins worldwide.
The complaint also alleges that, absent a remedy, the acquisition would harm the U.S. market for hepatitis B immune globulin, or HBIG, a plasma-derived injectable medicine that provides hepatitis B antibodies for preventing hepatitis B infections. When Grifols announced the proposed acquisition in December 2017, Biotest US owned 41 percent of ADMA Biologics, Inc., which has the largest share in the U.S. market for HBIG and competes with Grifols and one other supplier.
Biotest US has recently transferred its ownership share in ADMA to The Biotest Divestiture Trust, the parent company of Biotest US. Because Grifols is only seeking to acquire Biotest US and not its parent, Grifols will not acquire any ownership interest in ADMA under the proposed acquisition. Under the proposed consent agreement, Grifols is prohibited, without prior notification, from acquiring any ownership interest in ADMA or obtaining any rights to nominate or obtain representation on the ADMA Board of Directors.
Grifols also is required to provide prior notice to the Commission if it seeks to re-purchase any of the divested plasma collection centers.
Consumer harm from the companies’ proposed transaction, and the settlement preserving competition
According to the complaint, donated plasma is a critical input for a variety of medical products that are used to treat immune system disorders, lung and blood conditions, trauma and infectious disease. The relevant geographic markets for plasma collection services are local due to the limited distance individuals are willing or able to travel to donate plasma. In each of the geographic areas of concern, Grifols and Biotest US operate plasma collection centers very close to each other, and the next-closest alternative is quite distant. Donors typically do not travel more than 25 minutes, or 15 to 20 miles, to donate plasma. Donors, who generally receive a per-donation fee, choose their donation center based on proximity, convenience, quality of the facility and the amount of the fee.
Absent the divestiture of plasma collection centers in Lincoln, Nebraska, Augusta, Georgia, and Youngstown, Ohio, the proposed transaction would likely lead to diminished service and quality, as well as longer wait times for donors in these markets. Also, absent the divestiture, Grifols likely would be able to exercise market power by unilaterally decreasing donor fees at one or both of the plasma donor centers in each of the three geographic areas.
According to the complaint, there are no viable substitutes for HBIG, a plasma-derived product used to treat healthcare professionals or patients exposed or potentially exposed to the hepatitis B virus, and to prevent recurrence of hepatitis B in hepatitis B-positive liver transplant patients. The relevant geographic market for HBIG is nationwide. The U.S. Food and Drug Administration requires that HBIG be manufactured only in FDA-approved plants, from plasma collected in FDA-approved collection centers in the United States. Plasma-derived products not approved by the FDA for sale in the United States are not viable alternatives for U.S. consumers.
Absent the transfer of the ADMA ownership interest from Biotest US to its parent, the proposed acquisition would have significantly increased market concentration and eliminated substantial competition between ADMA, the largest supplier of HBIG, and Grifols, the third-largest supplier. Acquiring the ownership interest in ADMA would have given Grifols an incentive to increase the price of its HBIG product.
Additional details about the case are provided in the analysis to aid public comment for this matter. The Commission vote to issue the complaint and accept the proposed consent order for public comment was 5-0.
The FTC will publish the consent package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Aug. 31, 2018, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $41,484.