Heart Device Maker Abandons Acquisition After FTC Challenge

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Mechanical heart pump manufacturer Thoratec Corporation abandoned its proposed $282 million acquisition of rival HeartWare International, Inc. on July 31, after the deal, which was announced in February 2009, came under attack by the FTC.

FTC Administrative Complaint

The FTC charged in an administrative complaint on July 28 that the transaction would substantially reduce competition in the U.S. market for left ventricular devices (LVADs). On July 30, the Commission announced that it would seek a preliminary injunction in federal court to stop the transaction and limit the harm to competition, pending completion of the administrative trial.

According to an FTC administrative complaint, Thoratec—the “world’s leading supplier of LVADs”—currently has a monopoly on the commercial sale of the devices in the United States and sought to maintain its monopoly by acquiring HeartWare, thus eliminating the only significant threat to its continued dominance of the LVAD market.

LVADs are surgically-implantable miniature blood pumps designed to support and sustain patients suffering from end-stage heart failure, typically a fatal condition. LVADs provide full circulatory support by assuming the work of the left ventricle, the heart’s primary pump chamber.

End-stage heart failure patients have severely weakened hearts, and the only curative treatment is a heart transplant. LVADs provide temporary support for end-stage heart failure patients awaiting a donor heart and may function as a permanent therapy for patients ineligible to receive a heart transplant.

Thoratec’s flagship product (the “HeartMate II”), and that product’s predecessor, are the only LVADs currently on the market that are approved for commercial sale by the FDA, the agency noted. HeartWare is one of a small number of companies developing LVADs—and by far the biggest threat to Thoratec, the FTC asserted.

HeartWare’s device, the “HVAD,” is currently being used by patients participating in clinical trials and is positioned to be the next LVAD approved by the FDA. It offers a novel design that promises superior reliability with fewer surgical complications, the agency said.

Competition from HeartWare has already forced Thoratec to innovate even though the HVAD is still in clinical trials, according to the administrative complaint. The competition will intensify once HeartWave’s HVAD receives FDA approval, resulting in lower prices and enhanced features that will increase the availability and quality of these lifesaving devices.

Thoratec’s Response

On July 31, Thoratec announced that it would not proceed with the proposed acquisition. Thoratec President and CEO Gary Burbach declared in a press release that litigation to pursue the acquisition was not in “the best long-term interests” of the company’s shareholders, given what would likely be “a protracted, costly and unpredictable litigation process.

Subsequently, the FTC issued a statement calling the announcement “a major victory for the patients who rely on these critically important life-saving medical devices.”

FTC Bureau of Competition Director Richard Feinstein said “[n]ow that Thoratec and HeartWare have called off their proposed merger, U.S. consumers who are already facing increasing health care costs will reap the benefits of both current and future competition between these two companies.”

Further details regarding In the Matter of Thoratec Corp. and HeartWare International, Inc. appear here at the FTC website.