Consumer News Release
For immediate release -- Wednesday, July 12, 2000.
Iowa to be Paid in Case Alleging Monopoly Scheme by Giant Prescription Drug Maker
States and FTC alleged that Mylan Laboratories "cornered the market" on ingredients and then raised the price of two key drugs by over 2000 percent.
DES MOINES-- Attorney General Tom Miller announced Wednesday that Iowa, other states and the Federal Trade Commission have settled in principle a lawsuit that alleged a monopolization scheme led by Mylan Laboratories of Pittsburgh PA.
"The States and FTC alleged that Mylan developed an illegal plan late in 1997 to drastically increase prices on two generic drugs the company makes," Miller said. "First, Mylan eliminated real and potential competitors by cornering the market on the drugs' active ingredients. Then, in early 1998, Mylan raised the price of one drug by 2000 percent and the other by 3000 percent," he said.
"We alleged that Mylan's actions were illegal and unconscionable - all the more so because some of the drugs are widely used to treat symptoms of anxiety and frequently are needed by nursing home and hospice patients and people with Alzheimer's disease," he said.
Miller said settlement of the lawsuit, which was filed in December 1998, will result in payments of $100 million to the states. He said preliminary figures indicate that Iowa's portion may be about $1.6 million. The suit was settled in principle Wednesday afternoon when the resolution was approved by Mylan's board of directors. Final terms are expected to be completed within several weeks, subject to approval by the State Attorneys General, the FTC, and U.S. District Court Judge Thomas F. Hogan. Thirty-three states are involved in the litigation.
Funds going to the states will be used to benefit consumers and reimburse the states' programs that paid inflated prices because of the alleged price-fixing activity.
The lawsuit alleged that Mylan Labs cornered the market on ingredients for two drugs, clorazepate and lorazepam, by entering into long-term agreements with suppliers and distributors so that only Mylan would have reliable sources to obtain the active ingredients. Other defendants named in the suit were Cambrex Corporation, a New Jersey maker and marketer of specialized chemicals; Profarmaco, a wholly-owned Italian subsidiary of Cambrex; and Gyma, a New York company that distributes pharmaceutical compounds for Profarmaco and other manufactureres.
After cutting off competitors' supply of key active ingredients for the drugs, the suit alleged, Mylan raised the price of clorazepate more than 3000 percent in January 1998. The price jump translated to an increase from about two cents per tablet to over 75 cents per tablet for clorazepate.
Two months later, Mylan increased the price of lorazepam more than 2000 percent, or an increase from just over one cent per tablet to over 37 cents per tablet.
Together, the two drugs are prescribed nationally about 20 million times per year.
The suit alleged antitrust violations by Mylan including illegal restraint of trade, monopolization, and conspiracy to monopolize the markets for the two generic drugs.
"It is illegal for companies to conspire to eliminate competitors and then raise prices like this," Miller said.
"I am especially pleased we were able to take this action in the area of prescription drugs. High drug prices concern everyone, especially older Iowans. While we can't guarantee lower prices, we will take action when companies violate antitrust laws, because that hurts consumers, taxpayers and companies that play by the rules."
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