Washington, DC - Global pharmaceutical company Novartis AG has agreed to divest Habitrol, its nicotine replacement therapy patch, to settle FTC charges that its consumer health care products joint venture with GlaxoSmithKline (GSK) would likely be anticompetitive. GSK currently sells its own nicotine replacement patch, Nicoderm CQ.
London-based GSK and Switzerland-based Novartis each manufacture and market a range of consumer health care products in the United States, including toothpaste, cold-and-flu remedies, indigestion remedies, skin care aids, and smoking cessation products.
Under the terms of the proposed joint venture agreement, GSK will control the joint venture and contribute, among other products, its nicotine patch business. Novartis will have a 36.5 percent interest in the joint venture, and without the divestitures required by the proposed order, would continue to own the Habitrol business, which had U.S. sales of more than $58 million in 2013.
Consumers use nicotine patches to reduce their nicotine intake gradually while quitting smoking. According to the FTC’s complaint, Novartis and GSK are the only companies that market branded nicotine patches in the United States, and two of only three companies that supply private label patches to retailers. Without the divestiture contained in the proposed settlement, Novartis’s ownership of both Habitrol and a substantial interest in the joint venture that sells GSK’s nicotine patches would substantially reduce competition and lead to higher prices for Habitrol and Novartis’s private-label patches.
Potential competitors would find it difficult, expensive, and time-consuming to develop new patch products and secure FDA approval, reinforcing the substantial competitive concerns. To preserve competition in the market for nicotine patches, the proposed consent order requires Novartis to divest Habitrol, as well as its private-label patch business to India-based Dr. Reddy’s, one of the largest sellers of private-label over-the-counter health products to the U.S. market.