California Reaches $100 Million Multi-state Settlement With Drug Giant Mylan Over Alleged Price-fixing Scheme

Wednesday, July 12, 2000
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(SACRAMENTO) – Attorney General Bill Lockyer today announced that a $100 million multi-state preliminary settlement reached with pharmaceutical giant Mylan Laboratories will provide refunds to California and consumers for price-gouging from an alleged drug monopoly scheme involving the popular generic drugs Lorazepam and Clorazepate, used to treat tension, anxiety and insomnia.

Final terms of the settlements with the Pittsburg-based pharmaceutical and three companies that provide key ingredients for the drugs are subject to approval by 32 state Attorneys General, the Federal Trade Commission and U.S. District Court Judge Thomas Hogan. Mylan's board of directors has approved the terms of the settlement in principle. California's share of the settlement will be based on expert calculations that are being developed now and will be used to reimburse state programs and help consumers.

"We brought the antitrust action to go after companies that tried to corner the market and fix prices," Lockyer said. "This kind of behavior is unconscionable and caused nursing home and hospice patients who frequently use the drugs to suffer from astronomical price hikes of more than 2000 percent."

In the settlement, Mylan also agreed to certain restrictions in its supplier agreements in order to restore competitive balance to the pharmaceutical market and to reimburse the states for up to $8 million in legal and investigative costs. The settlement announced today does not affect numerous pending class-action lawsuits filed by private attorneys on behalf of insurers, drug retailers and consumers.

The multi-state lawsuits and antitrust complaint by the FTC alleged that Mylan developed a plan in late 1997 to dramatically increase prices on two of its 91 generic drugs by cutting off the supply of active ingredients to competitors. Mylan sought to control the market by entering into long-term profit sharing agreements with industry suppliers and distributors that gave Mylan the only reliable sources of the active ingredients.

In January 1998, Mylan raised the price of Clorazepate more than 2200 percent. Clorazepate is a generic version of Abbott Laboratories' Tranxene that is prescribed nearly three million times each year in the country. The price jump translated to an increase from $22.72 to $754 for a 1000-tablet supply of the drug.

In March 1998, Mylan raised the price of Lorazepam more than 2000 percent. Lorazepam is a generic version of Wyeth-Ayerst's Atizan that is prescribed nationally more than 17 million times each year. Cost of the drug rose from $13.60 to $378 for a 1000-tablet bottle. Sales of the drug reportedly increased from $9 million in 1997 to $133 million in 1998, largely as a result of the sharp price increase. Lorazepam sales in 1999 were estimated at $158 million.

Mylan manufactures nearly all its generic drugs at facilities in West Virginia and Puerto Rico. For the most recent fiscal year ending March 31, Mylan reported net earnings of $154.2 million on total revenue of $790.1 million.

The Attorney General's Office was assisted by the state Departments of Mental Health, Health Services, Developmental Services, Corrections and General Services in developing information used to pursue these claims.

Other states involved in the settlement are Alaska, Arkansas, Colorado, Connecticut, Florida, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont ,Washington, West Virginia and Wisconsin.

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