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Fresenius AG, of Bad Hamburg, Germany, through its subsidiary, Fresenius USA, Inc., located in Walnut Creek, California, has agreed to divest its Lewisberry, Pennsylvania hemodialysis (HD) concentrate plant to Di-Chem, Inc., in order to resolve Â鶹´«Ã½ Trade Commission antitrust concerns stemming from Fresenius’ proposed acquisition of National Medical Care, Inc., (NMC) from W.R. Grace & Co. Fresenius is one of the world’s leading producers of kidney dialysis equipment, including dialysis machines, and disposable products such as tubing, needles and dialysis concentrate. NMC, the principal health care subsidiary of W.R. Grace, is the largest dialysis services company in the United States, operating over 500 dialysis centers. NMC operates medical laboratories, provides home health care services and manufactures and markets a number of dialysis products, including HD concentrate.

HD concentrate is a sodium bicarbonate solution used in hemodialysis treatment. Hemodialysis is the treatment for removing toxic wastes from the bloodstream of patients with chronic kidney failure, known as End Stage Renal Disease. According to the National Kidney Foundation, there are approximately 220,000 patients that now receive dialysis treatment at a clinic three times a week, for three to four hours each time. It is estimated that the number could increase to 300,000 by the year 2000.

According to the FTC complaint, Fresenius’ proposed acquisition of NMC would combine two significant producers of HD concentrate in the United States and would produce a firm with a market share of approximately 45-50 per cent. Fresenius and NMC are actual and direct competitors in the United States market for HD concentrate, and entry into the HD concentrate market is difficult and unlikely to restore competition, the FTC said.

The effects of the acquisition, alleges the FTC’s complaint detailing the charges in this case, would be to substantially lessen competition in the U.S. market for HD concentrate because, among other things:

• it will eliminate substantial head-to-head competition between Fresenius and NMC.;
• it will substantially increase concentration in a highly concentrated market;
• it will increase the likelihood of coordinated interaction among producers of HD concentrate; and
• it will likely result in increased prices for HD concentrate.

In announcing the proposed order, FTC Bureau of Competition Director William Baer noted, "This proposed consent requires Fresenius to divest its hemodialysis business quickly to Di-Chem. By identifying an approved buyer in the order, we have great confidence that competition will be preserved. "

The proposed consent agreement to settle the charges, announced today for public comment, would require Fresenius to divest it’s Lewisberry, Pennsylvania HD concentrate production facility to Di-Chem within ten business days of either the date this order is made final, or the closing of the NMC acquisition. Di-Chem, a Maple Grove, Minnesota-based company, manufactures and markets additives used in conjunction with HD concentrate. Under the proposed settlement, pending the divestiture, Fresenius is required to maintain the marketability, viability, and competitiveness of the Lewisberry plant. In the event that the divestiture agreement between Fresenius and Di-Chem is terminated, Fresenius must, within four months after either the date this order becomes final or the closing of the NMC acquisition, divest the Lewisberry plant to an acquirer who receives prior-approval from the FTC. If Fresenius does not accomplish the divestiture, the FTC may appoint a trustee to oversee divestiture of the Lewisberry plant.

The proposed consent agreement will be published in the Â鶹´«Ã½ Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Public comments regarding all aspects of the proposed divestiture to Di-Chem will be considered along with other comments on the proposed order. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

The Commission vote to accept the proposed consent agreement for public comment was 4-1, with Commissioner Roscoe B. Starek, III, dissenting. In his statement, Starek said that "evidence accumulated in the investigation is not sufficient to give rise to reason to believe that respondents’ acquisition of National Medical Care, Inc. ('NMC’) from W.R. Grace & Co. is likely to lessen competition substantially in a United States market for hemodialysis concentrate ('HD concentrate’)." Starek said that HD concentrate is easily formulated, that producers have entered the industry easily and can quickly expand capacity, and that there are less stringent FDA regulations applicable to HD concentrate. "Thus, any assessment of this acquisition’s potential to increase concentration in the market for HD concentrate -- and in turn make likelier an exercise of market power -- must take into account several strongly mitigating factors, including approximately 40 percent current excess capacity, the aforementioned ability of manufacturers to expand capacity speedily and at minimal cost, and the evident ability of customers (hemodialysis clinics) to integrate into the manufacture of HD concentrate in the event concentrate producers behave anticompetitively." Starek concluded by saying, "...when the evidence on entry, expansion, and the absence of anticompetitive effects is as clear as in this case, the issuance of a consent order is unwarranted."

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. 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 $10,000.

Copies of the complaint, the proposed consent agreement, and an analysis of the agreement to aid in public comment are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov

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(FTC File No. 961 0053)