WASHINGTON (New York Times News Service) — Mylan Laboratories, one of the world's largest producers of generic drugs, tentatively agreed on Wednesday to pay $147 million to settle accusations that it improperly cornered the market on raw materials for two widely prescribed drugs and then raised the price of those drugs, in some instances by more than 3,000 percent.
If approved by the government and a judge, the settlement with Mylan would be the largest ever reached by the Federal Trade Commission in an anti-competition case.
It would resolve lawsuits filed almost two years ago by the commission, 33 states and a number of other drug purchasers, from the largest health maintenance organizations to groups of insured and uninsured patients. They had accused Mylan of monopolizing the market and conspiring to restrain trade.
The tentative settlement, which was confirmed by government officials, also proposes to plow new legal ground by using most of the money to reimburse consumers.
In the majority of antitrust cases, the Federal Trade Commission has sought injunctions to halt illegal conduct. It is rare for the commission to force a company to surrender what it regards as ill-gotten gains.
The settlement also marks an important step in efforts by the government to control spiraling medical costs. Generic drugs have historically been more attractive to consumers, particularly people on fixed incomes and the elderly, because they are less expensive than brand names.
But a few years ago the prices of many popular generic drugs began to rise drastically, far outpacing increases in brand-name drugs, and some analysts said that Mylan was the most aggressive of the price raisers.
The cases concerned two widely prescribed anti-anxiety drugs, which shot up in price in 1998. Doctors issue more than 21 million prescriptions each year for the drugs, lorazepam, the generic version of Ativan, and clorazepate, the generic version of Tranxene.
In 1998, Mylan raised the price of a bottle of 500 tablets of clorazepate to $377 from $11.36. A similar-sized bottle of lorazepam was raised to $190 from $7.
The government said the price increases were a result of exclusive license agreements Mylan had reached with its supplier for certain ingredients of the drugs. The government said the agreements prevented Mylan's rivals from obtaining sufficient supplies and enabled the company to gouge patients on the prices it charged for the drugs.
Officials said on Wednesday that they had vigorously pursued Mylan because they thought the company's conduct was particularly egregious and had hurt society's most vulnerable members.
"This illegal conduct has cost consumers millions of dollars over the past two years," said Betty D. Montgomery, the attorney general of Ohio. "What makes this behavior even more unconscionable is that these drugs, especially lorazepam, are anti-anxiety mediations frequently prescribed for nursing home and hospice patients, including those suffering from long-term debilitating conditions such as Alzheimer's disease."
"The bulk of the restitution will go back into the pockets of the affected seniors, where it belongs," she added.
As they have since 1998, Mylan executives said on Wednesday that they never violated any antitrust laws. But they said that they had decided to settle because of the continuing costs and uncertainties associated with the lawsuits. Mylan officials estimated that the lawsuits had already cost the company more than $20 million and that in recent months it was spending about $6 million every quarter on the litigation. Company executives also said they were willing to settle the cases for more than the federal government had sought because they feared that the government might try to expand the lawsuit, include broader accusations and seek larger damages. The federal government had sought $120 million, and the amount being sought by the private plaintiffs has not been disclosed.
"This is the first time in Mylan's 39-year history that any government agency has accused us of improper conduct," said Milan Puskar, chairman and chief executive of the company, which is based in Pittsburgh. "We continue to believe we acted properly."
"The board and I view these settlements to be in the best interest of our company's shareholders, customers and employees," Puskar said. "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."
While many details of the tentative settlement must be ironed out over the next month, the plan is to distribute $100 million to all of the states, which will then determine which purchasers should be reimbursed.
More than a dozen states have their own drug assistance programs to help low-income patients, and they may be among the larger beneficiaries of Wednesday's agreement.
An additional $35 million is earmarked to settle private lawsuits brought by institutional purchasers. The remaining $12 million will be paid to the government and private lawyers to cover legal costs.
But the tentative settlement does not end all of the legal disputes. Mylan executives said the agreement did not settle 11 lawsuits brought by some institutional purchasers, like wholesalers. The company said it would continue to defend against those cases and that it was confident it would prevail.
Three other companies that were accused of conspiring with Mylan to corner the market on raw ingredients also settled, but because they are indemnified by Mylan they will not have to pay any damages. The three are the Cambrex Corporation, a chemical supplier in East Rutherford, N.J.; Profarmaco, an Italian drug supplier owned by Cambrex; and Gyma Laboratories of America, which is in Westbury, N.Y., and is Profarmaco's American distributor.