FTC Orders Cardinal Health to Sell Nuclear Pharmacies

The Federal Trade Commission has ordered Cardinal Health, Inc. to sell nuclear pharmacies it bought two years ago from Biotech in Las Vegas, NV, Albuquerque, NM, and El Paso, TX. In a proposed settlement order this week, the FTC said the deal reduced competition for low-energy radiopharmaceuticals in the three southwestern cities.

In an e-mail to HealthLeaders, a Dublin, OH-based Cardinal Health representative said: "After our acquisition of Biotech, the Federal Trade Commission (FTC) began an inquiry into the effect that the acquisition may have had on nuclear pharmacy competition in El Paso, Albuquerque and Las Vegas. We cooperated fully with the FTC inquiry and have voluntarily agreed to sell our three former nuclear pharmacies located in El Paso, Albuquerque and Las Vegas."

Before the July 2009 purchase, Cardinal and Biotech both operated nuclear pharmacies that produced, sold, and distributed low-energy radiopharmaceuticals in the three cities. After the acquisition, Cardinal relocated its nuclear pharmacy businesses to the former Biotech nuclear pharmacies and closed its own, FTC said.

Cardinal now holds a low-energy radiopharmaceuticals monopoly in Albuquerque. In El Paso, Cardinal held a monopoly until November 2010, when another nuclear pharmacy opened in the city. Cardinal still holds a large market share in El Paso. In Las Vegas, there were three competitors before the acquisition, and Cardinal and Biotech were the two leading providers. As a result of the acquisition, Cardinal obtained, and has since held, a large market share, FTC said.

The FTC order requires Cardinal to:

• Reconstitute the three nuclear pharmacies it had operated in these markets prior to the acquisition, and sell each one to an FTC-approved buyer;
• Divest to each buyer the intellectual property related to the nuclear pharmacies that Biotech owned before the acquisition;
• Obtain, maintain, and transfer all regulatory approvals, licenses, permits, clearances, and other assets needed to operate the pharmacies being acquired;
• Demonstrate to the FTC that each buyer has a supply of two vital low-energy radiopharmaceutical inputs, the radioisotope technetium 99 and a heart-perfusion agent;
• Grant customers in Las Vegas, Albuquerque, and El Paso a two-year right to terminate – without penalty or charge – their existing contracts with Cardinal to buy low-energy radiopharmaceuticals. This will ensure that the new buyers can compete with Cardinal for business. Cardinal must notify customers of their right to terminate existing contracts;
• Facilitate and not interfere with the new buyers' recruitment of former Biotech employees and current Cardinal nuclear pharmacy employees in the three cities, and releases employees from restrictions on their ability to work for the new buyers.

If new buyers are not found within six months, FTC said it may appoint a divestiture trustee to carry out the sale.

The FTC appointed Katherine L. Seifert, of Seifert and Associates, Inc., to serve as an independent monitor.

Following a 30-day public comment period that ends Aug. 22, the FTC will decide whether to make permanent the proposed order.

A consent order is for settlement purposes only and does not constitute an admission of a law violation.  
Cardinal Health's statement to HealthLeaders further said: We will continue to operate our current nuclear pharmacies located in El Paso, Albuquerque and Las Vegas. Through the Biotech acquisition, Cardinal Health expanded our presence in PET manufacturing by adding additional cyclotrons to our network. These cyclotrons are not part of the sale offering. We intend to complete the sale of our three former nuclear pharmacies later this year. The sale of these nuclear pharmacies will not have a significant impact on Cardinal Health's financial performance.