Drug Maker to Settle Case for $135 Million
The nation’s second-largest maker of generic drugs agreed Wednesday to pay $135 million to settle federal, state and private lawsuits charging it with fixing the prices of two widely prescribed anti-anxiety medications.
The suits against Mylan Laboratories of Pittsburgh marked the first time the federal government had sought such massive fines against a pharmaceutical company for price fixing, and just the second time that it had asked for fines in an antitrust action against a drug maker.
Mylan Laboratories said it was admitting no wrongdoing in agreeing to the settlements, which took 19 months to negotiate after the Federal Trade Commission filed the lead suit late in 1998.
The company, which makes lorazepam, the generic version of Ativan, and clorazepate, the generic for Tranxene, raised prices by as much as 3,000% on the two drugs, officials claimed in the suits. The drugs are commonly used to treat anxiety and hypertension among the elderly.
The FTC and attorneys general for 32 states including California said that Mylan--along with Cambrex Corp. of East Rutherford, N.J.; Cambrex’s Italian subsidiary, Profarmaco; and drug distributor Gyma Laboratories of America Inc. of Westbury, N.Y., conspired in 1997 to control ingredients for the two drugs.
Then, according to the suits, Mylan raised the price of lorazepam from $7.30 for a bottle of 500 tablets to $190. The price for clorazepate rose from $11.36 to $377 for a bottle of 500.
“This kind of behavior is unconscionable and caused nursing home and hospice patients who frequently use the drugs to suffer from astronomical price hikes,” said California Atty. Gen. Bill Lockyer, who joined the other states’ suit after taking office in 1999.
Lockyer, who recently participated in a suit that resulted in a $300-million settlement with credit card issuer Providian Inc., said the Mylan settlement was among the larger ones negotiated by federal and state officials.
Ohio Atty. Gen. Betty Montgomery said the Mylan price hikes cost U.S. consumers as much as $180 million.
The exact amount of the settlements are still fluid, pending final negotiations with the states and federal officials. Most likely, according to several attorneys involved in the cases, $100 million will be paid to the states and federal government, and will eventually be returned to consumers. About $35 million more will settle private class-action lawsuits filed on behalf of consumers and other purchasers of pharmaceuticals. An additional $12 million has been earmarked for attorneys’ fees.
In settling the lawsuits, Mylan has indemnified its subcontractors, and will bear the cost of the payouts, Mylan said in its news release.
Mylan Chairman and Chief Executive Milan Puskar continued to dispute the accusations, which he characterized at the time the suits were filed as “radical, rushed and wrong.”
“This is the first time in Mylan’s 39-year history that any government agency has accused us of improper conduct,” Puskar said. “We continue to believe we acted properly. However, the board and I view these settlements to be in the best interest of our company’s shareholders, customers and employees. By putting a significant portion of this case behind us, we can now look forward to devoting our full resources to the business of this company.”
Shares of Mylan rose 50 cents to close at $19.50 in regular trading on the New York Stock Exchange on news of the settlement. Last month, the company warned that its first-quarter earnings would be only half of what Wall Street expected because of lower prices for the two anxiety drugs.
The company has not, however, settled suits brought by pharmaceutical wholesalers, and plans to fight them in court.
Final details are expected to be worked out in the next several weeks, pending formal approval by government authorities.
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Reuters contributed to this report.
