Staying true to its pledge to crack down on potentially anticompetitive megamergers in the healthcare industry, the U.S. Federal Trade Commission has ordered Medtronic and Intersect ENT to adjust the terms of their acquisition deal before finally tying it off.
According to this week’s order (PDF), while Medtronic is now cleared to proceed with its purchase of Intersect, it must sell off Fiagon, the latter’s subsidiary, within 10 days of closing the acquisition.
The pair made plans to divest Fiagon at the end of March, as the FTC’s review of the merger dragged on. At the time, Intersect said in a filing (PDF) with the U.S. Securities and Exchange Commission that it had come to an agreement with Minnesota-based Hemostasis to purchase Fiagon for an undisclosed amount, but noted that the close of the deal was subject to the FTC’s continued investigation into potential antitrust violations.
With the FTC’s approval of Hemostasis as Fiagon’s new owner, Intersect announced in another SEC form (PDF) this week that the agency’s probe has come to a close, and the deal with Medtronic can now proceed.
Medtronic’s plan to purchase Intersect in an all-cash deal totaling $1.1 billion was unveiled last August. It subsequently came under close FTC scrutiny, with the trust-busting watchdog putting out a “second request” for more information on the merger the following month.
The FTC ultimately decided to require Fiagon to be separated from the combined companies out of concern that adding its ear, nose and throat navigation systems and balloon sinus dilation products to Medtronic’s existing portfolio of both devices could create something of a monopoly in the space, potentially driving up costs for healthcare providers and patients and stifling innovation.
According to the agency’s official complaint (PDF), “But for the acquisition, Fiagon would be a competitive threat to Medtronic’s continued market dominance in ENT navigation systems and would provide physicians and their patients new and innovative treatment options in competition with Medtronic and its other competitors.”
It noted that Fiagon and Medtronic are joined only by Johnson & Johnson and Stryker as “significant competitors” in the balloon sinus dilation and ENT navigation markets—plus a few other smaller competitors in each area—and so combining the two would both slim down an already narrow market and greatly increase Medtronic’s huge footprint.
“Today’s action by the FTC is part of our efforts to combat the problem of rising healthcare costs,” Holly Vedova, director of the agency’s competition bureau, said in a statement Tuesday. “These are already concentrated markets for critical medical instruments. Medtronic is the top provider of ear, nose and throat navigation systems.”
In addition to requiring Fiagon to be divested, the order also demands that Medtronic and Intersect seek the FTC’s approval before purchasing any other ENT navigation or balloon sinus dilation assets for the next decade.
Hemostasis, too, will be closely watched by the agency. It’s required to seek approval before selling off Fiagon’s assets to any buyer for the next three years. After that, for the following seven years, it’ll have to get permission from the FTC only if it plans to divest the products to another company that already manufactures ENT navigation systems or balloon sinus dilation products.