ICN Is Fined $900,000 in Drug-Overcharging Case

In the first action of its kind, a Canadian government agency said Monday that it fined ICN Pharmaceuticals Inc. about $900,000 for “excessively” overcharging hospitals for its main drug, Virazole.

The agency, which issued the fine as $1.2 million in Canadian dollars, also ordered the company to cut the price of a 12-hour dose to about $200 in Canadian dollars from about $1,540.

The Costa Mesa pharmaceuticals maker intends to appeal the agency’s decision in Canadian federal court, a spokeswoman said.

The company, which has been selling Virazole in Canada since 1986, has been accused in the past of price gouging on sales of the drug in the United States and Mexico. Virazole, the brand name for ribavirin, treats hospitalized infants with lower respiratory-tract infections.

Canada’s Patented Medicine Prices Review Board, unlike anything in the United States, regulates the prices of patented drugs to ensure they aren’t excessive. The agency was formed in 1987 when the government, in a favor to drug makers, agreed to extend the length of patent protection on pharmaceuticals.

The ICN fine makes the company the only one in the agency’s history that hasn’t complied voluntarily with an order, agency officials said. Other companies have reached compromises.

ICN sold Virazole in Canada at about $400 a dose until December 1993, when the company claims its patent expired, said Gordon Cameron, an agency lawyer. The following year, ICN hiked the price to $750, then to $1,540, where the price remained at least until the end of last year, Cameron says.

The agency ordered the company to report its Virazole pricing this year by August 5.

The pricing issue first arose last year when Canadian hospitals filed complaints with the agency.

ICN objected that the agency didn’t have jurisdiction over the pricing because the patent had expired, and appealed to a federal court. The federal court agreed with the agency that other current ICN patents applied to Virazole. The company appealed and is awaiting a decision.

Separately, the agency held its own hearings, which led to the the fine and the reduced price.

“We will seek a stay of the board’s order until judicial processes are completed,” said an ICN spokeswoman.

She said that the company priced the drug to help recover the $250-million it invested in its development. Since the drug’s introduction in Canada, its Canadian subsidiary has had losses of more than $9 million in Canadian dollars, she said.

In the mid-1980s, ICN faced criticism for overcharging patients, who flocked to Mexico to buy Virazole as an experimental treatment for AIDS. When ICN tripled the price, pushing it in Tijuana to $22 for a day’s supply, activists protested the price gouging, threatening a $45-million investment Eastman Kodak Co. had made in the company to work on a joint project developing other drugs.

ICN eventually worked out a deal to supply the drug in Mexico City at about $7 for a day’s supply, according to “Acceptable Risks,” a book by Jonathan Kwitny about the effort to approve drugs for AIDS patients.

In 1994, ICN stirred anger in the U.S. medical community when it doubled the daily price it was charging patients with respiratory infections to $2,000. Though ICN’s profit margins soared that year, its unit sales of the drug fell.