Context

Recently, the Competition Commission of India (CCI) has approved the formation of a joint venture for consumer healthcare products by pharmaceutical giants GlaxoSmithKline (GSK) and Pfizer.

About

Background:

• GSK, in December 2018, has reached an agreement with Pfizer to combine their consumer health businesses into a new joint venture (JV) with combined sales of around $12.7 billion (around ? 88,900 crore).

Proposals by CCI

• The proposed combination involves acquisition of Pfizer's consumer healthcare business by GSK, and the combination of GSK and Pfizer consumer healthcare business into a global consumer healthcare joint venture under the sole control of GSK.
• After the deal, GSK will have a majority controlling equity interest of 68% in the combined consumer healthcare business, while Pfizer will have a minority non-controlling equity interest of the remaining 32%.
• Pfizer will get a much-needed revival through the JV. Pfizer has less brand recall among consumers and is not known for its consumer business in India.
• The JV will be a category leader in Pain Relief, Respiratory, Vitamin and Mineral Supplements, Digestive Health, Skin Health and Therapeutic Oral Health.

GlaxoSmithKline (GSK) and Pfizer GSK is a British pharmaceutical company headquartered in London, whereas Pfizer is a US-based firm with headquarters in New York. In consumer healthcare segment, GSK is active in research, development, manufacturing, and marketing of products which are typically available without prescription (over-the-counter) for various indications. On the other hand, Pfizer's consumer healthcare segment develops, manufactures and markets non-prescription medicines, vitamins, and nutritional products. About CCI The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and M&A), which causes or likely to cause an appreciable adverse effect on competition within India. The objectives of the Act are sought to be achieved through the Competition Commission of India, which has been established by the Central Government with effect from 14th October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central Government. The main goal of CCI is to create and sustain fair competition in the economy that will provide a ‘level playing field’ to the producers and make the markets work for the welfare of the consumers.

Way Ahead

• According to GSK, the new entity, which will sell over the counter (OTC) drugs and healthcare supplements, will have a combined market share of 7.3% in the OTC market.
• GSK also expects to receive all required regulatory approvals to complete the transaction in the second half of 2019.

Significance

• This step provides a unique opportunity to accelerate GSK’s strategy and create substantial value for shareholders.
• It lays foundation for separation of GSK to create two new UK-based global companies focused on Pharmaceuticals/Vaccines and Consumer Healthcare.
• The new Joint Venture will be well-positioned to deliver stronger sales, cash flow and earnings growth driven by category leading Power Brands, science-based innovation and substantial cost synergies.
• It also enhances prospects for consumer healthcare.