Competition Bureau statement regarding the acquisition of St. Jude Medical by Abbott

Position statement

The Competition Bureau announced today that it has reached a consent agreement with Abbott Laboratories (Abbott) to resolve the Bureau’s concerns related to its proposed acquisition of St. Jude Medical, Inc.Footnote 1 Both companies sell medical devices in Canada for the treatment of heart disease and other cardiovascular conditions. Such devices include vessel closure devices (VCDs), which are used to close surgical access holes to stop bleeding following procedures for treating vascular disease.

The Bureau determined that Abbott’s acquisition of St. Jude would likely result in a substantial lessening of competition in the supply of VCDs used in certain cardiovascular procedures in Canada. To remedy this concern, the consent agreement requires the sale of St. Jude’s VCD business, including manufacturing assets, intellectual property and customer contracts. The Commissioner of Competition has approved Terumo Corporation (Terumo) as an acceptable purchaser.

Throughout its review, the Bureau worked closely with other jurisdictions including the United States Federal Trade Commission (U.S. FTC) and the European Commission. Our cooperation with the U.S. FTC regarding the remedy ensured a coordinated and effective resolution in both jurisdictions.

Background

On April 28, 2016, Abbott announced its intent to acquire St. Jude for US$25 billion (Proposed Transaction).

Abbott is a global health care company engaged in the research, development, manufacture and sale of diagnostics, medical devices, nutritionals and branded generic pharmaceuticals. As part of its Canadian operations, Abbott distributes its U.S.‑manufactured medical devices used in the treatment of vascular diseases to hospitals and health care facilities located across Canada.

St. Jude is also a multinational healthcare company that develops, manufactures and sells a diverse portfolio of medical devices and medical supplies. As part of its operations in Canada, St. Jude distributes a range of medical devices for the treatment of vascular diseases and heart conditions, which it manufactures in Puerto Rico and Minnesota, U.S.

Analysis and competitive effects

In Canada, while the majority of medical devices offered by Abbott and St. Jude are largely complementary, each of the merging parties offer VCDs. Abbott’s VCDs are sold in Canada under the Perclose and Starclose trademark whereas St. Jude’s VCDs are sold under the AngioSeal trademark. Due to regulatory (Health Canada) requirements for selling medical devices, the relevant geographic market is Canada.

When performing an angiogram or other cardiovascular procedures, a catheter may be inserted into a patient’s artery through a hole in the skin and can be directed to the heart or to coronary and peripheral arteries or veins. Following the procedure, a VCD may be used to immediately seal the access hole made in the artery. While manual compression can often be an effective alternative to a VCD, the Bureau determined that for certain procedures or patient characteristics, there are no alternatives to a VCD.

The Parties are the two largest suppliers of VCDs in Canada, accounting for the vast majority of the VCD market. While recognizing a high degree of product differentiation between the Parties’ VCD products, the Bureau determined that the Parties’ products are considered each other’s closest competitor in the supply of VCDs used for certain femoral cardiovascular procedures.

The Bureau found that there is insufficient remaining competition in the supply of VCDs to reduce the likelihood of a potential price increase post‑transaction. In addition, entry into the VCD market requires specialized technological know‑how which involves:

  • performing extensive research and development;
  • conducting clinical trials;
  • obtaining the appropriate license and registration from Health Canada for the manufacture and distribution of the device in Canada; and
  • establishing a marketing network capable of serving the Canadian market.

Also, the VCD market is characterized by strong physician preferences and a reluctance to switch to new products given the retraining that would be required. As a result, absent a remedy, the Bureau concluded the merger would likely substantially lessen competition in the supply of VCDs in Canada.

Aside from VCDs, the only other existing overlap among the Parties is with respect to the sale of guidewires, which are thin, flexible wires used to assist physicians when performing various interventional or diagnostic procedures. The Bureau found there to be effective remaining competition in the supply of guidewires in Canada.

Remedy

To remedy the Bureau's concern related to VCD's, the consent agreement requires the sale of St. Jude’s VCD business, including manufacturing assets, intellectual property and customer contracts. The Commissioner of Competition has approved Terumo as an acceptable purchaser of Jude’s VCD business and, under the terms of the consent agreement, Abbott has 45 days to complete its sale to Terumo. Prior to entering into the consent agreement, the Bureau determined that Terumo is committed to carrying on the VCD business and has the managerial, operational and financial capability to effectively compete in Canada, thereby resolving the likely substantial lessening of competition that would otherwise occur. The identification of an up‑front buyer helps to ensure the timeliness of the sale and the viability of the assets to be divested. In addition, provisions in the consent agreement will ensure the assets to be sold are preserved and maintained until the sale is completed.

Given the global nature of the Parties’ VCD businesses, the Bureau coordinated its review with foreign jurisdictions, in particular, the U.S. FTC. In addition, the same monitor has been appointed by the Bureau and the U.S. FTC to ensure the completion of the sale of the VCD business and the transfer of all intellectual property related to VCDs, including Health Canada approvals. The monitor will also oversee transitional supply and services arrangements between Abbott and Terumo during an interim period to ensure the effective and efficient transition of the VCD business.

The Bureau is satisfied that the consent agreement will preserve competition for the sale of medical devices for the closure of small access holes in femoral cardiovascular procedures in Canada.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.

However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.


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