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DC Corporation Counsel Announces Final Settlement in Generic Drug Price-Fixing Case

Thursday, February 1, 2001

DC Corporation Counsel Announces Final Settlement in Generic Drug Price-Fixing Case

(Washington, DC) A $100 million federal/state antitrust settlement with pharmaceutical giant Mylan Laboratories has been finalized and filed in the US District Court here, DC Corporation Counsel Robert R. Rigsby announced today. The settlement is to be reviewed by US District Judge Thomas F. Hogan.

In 1998, the Corporation Counsel joined state attorneys general and the Federal Trade Commission in charging Mylan with violations of federal and state antitrust laws. Mylan was accused of orchestrating an illegal price increase of more than 2000 percent for two generic drugs, lorazepam and clorazepate, which are used to treat Alzheimer's disease and other afflictions. The resulting spike in pharmaceutical prices coincided with a 0.2 percent increase in the May 1998 national Producer Price Index, which the federal government uses to monitor national economic health. Following the price increases, members of Congress called for an FTC investigation into Mylan's business practices.

Under terms of the settlement, $28 million of the settlement funds will be paid to state governments damaged by the price increase. In addition, Mylan has agreed to the inclusion of 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 District of Columbia Government will receive a total of $188,000 under the settlement.

The remaining $72 million will be distributed nationally to individual consumers injured by the price increases. The states have 90 days to submit to the US District Court a plan to identify and distribute funds to consumer claimants. The states will ask Judge Hogan to approve a consumer claims period of at least 90 days. Any funds left over after individual claims have been processed will likely be distributed by the states, with court approval, to charitable organizations benefiting the elderly.

"The District of Columbia will continue to work closely with the state attorneys general and federal antitrust enforcers to protect consumers from unlawful efforts to manipulate market prices, especially in the area of health care," Corporation Counsel Rigsby said.

In 1998, 32 state attorneys general and the DC Corporation Counsel sued Pittsburgh-based Mylan, New Jersey-based Cambrex Corporation and SST Corporation, Italian pharmaceutical ingredient manufacturer Profarmaco S.r.l., and New York-based drug distributor Gyma, alleging that the companies had participated in a price-fixing and monopolization scheme led by Mylan. The suit was closely coordinated with a related lawsuit filed by the Federal Trade Commission (FTC).

In a landmark decision issued in July 1999, Judge Hogan found that the FTC had the legal authority to seek the disgorgement of ill-gotten profits by the defendants in this case. The $100 million settlement amount represents both the damages and restitution that were sought by the states, and the disgorgement of funds that was sought by the FTC.

Profarmaco S.r.l. is a wholly-owned subsidiary of Cambrex Corporation, a US manufacturer and marketer of specialized chemicals that is based in East Rutherford, NJ. Gyma is a Westbury, NY company that distributes pharmaceutical compounds for Profarmaco and other manufacturers. New Jersey-based SST Corporation is also a marketer to the pharmaceutical industry.