IMS Health's acquisition of SDI Health was officially consummated Monday and its parent company is moving forward to divest two SDI product lines, as per a settlement order proposed by federal regulators to preserve competition.
One of those two product lines, SDI's medical audit business, is part of a two-player market, with IMS controlling 53% and SDI holding a 47% stake. The fact that there are no other major providers of medical audits—market research products which estimate actual medical diagnoses made and therapies prescribed—is no excuse for not being able to sell the asset, insists the FTC, which put forth the settlement and must approve any buyer.
“They'll have to find someone else to get into that business,” said Mitchell Katz, an FTC spokesman, “and ensure that the new entrant can get up to speed on running it so it's a competitive asset in the marketplace.”
Nevertheless, the current duopoly could make the hunt for a suitor somewhat challenging for IMS parent Healthcare Technology Holdings. As the holding company moves forward with its acquisition of SDI through IMS, it must sell SDI's medical audit, along with its promotional audit business, to a buyer within three months of the completion of its deal to buy SDI, or the FTC may appoint a trustee to sell the assets (the holding company can also ask for an extension).
The deal was consummated yesterday following IMS's bid to acquire SDI last January. Terms were not disclosed, said IMS spokesman Gary Gatyas, Jr. “We are excited to have successfully completed our purchase of SDI Health,” Gatyas said in a statement. “Together, the newly combined company is well positioned to support the needs of our clients.”
In addition to medical audits, the two healthcare data and analytics firms also dominate the market for promotional audits, estimates of advertising and other promotional activities for branded drugs. SDI has 68% of the market, and IMS holds a 30% share. The rest—2%—is controlled by a third player, Cegedim, according to the FTC. A Cegedim spokesperson couldn't immediately be reached.
On the same day as it announced the settlement, the FTC filed a complaint alleging “that the proposed acquisition would substantially increase IMS's share in both the promotional audit and medical audit markets, while at the same time eliminating the direct and substantial competition of SDI, its only significant competitor.”
The settlement is designed to soothe the regulator's concerns that the acquisition would lead to “a unilateral exercise of market power by IMS in these markets” and higher prices. The parties signed the order to divest the assets, and the proposal, which has a 30-day public comment period, also requires IMS to hold the SDI promotional and medical audit assets separate and apart from its other businesses while ensuring they remain competitive pending their sale.