The Federal Trade Commission (FTC) appears to have won its largest antitrust settlement. Last month Mylan Laboratories Inc. and its subsidiary Mylan Pharmaceuticals, based in Pittsburgh, tentatively agreed to pay $135 million to purchasers of the antianxiety drugs lorazepam and clorazepate since January 1998.

Richard Ciccone, M.D., chair of APA’s Commision on Public Policy, Litigation, and Advocacy, told Psychiatric News, "This settlement will help ensure the enforcement of appropriate and proper pricing for psychiatric medications and their availability to our patients."

The FTC charges the second-largest drugmaker in the world with conspiring to corner the generic drug market for lorazepam and clorazepate tablets by cutting exclusive deals with suppliers of the drugs’ raw materials, according to a FTC brief filed in U.S. District Court for the District of Columbia in 1998.

The FTC alleges that Mylan violated federal antitrust law by acting to restrain trade and destroy competition through unfair business practices.

Mylan allegedly entered into an exclusive 10-year contract in 1997 with Profarmaco, an Italian company that supplies more than 90 percent of the active ingredient in lorazepam and 100 percent of the active ingredient in clorazepate to generic drugmakers in the United States.

Profarmaco; Cambrex Corporation in East Rutherford, N.J., which owns Profarmaco; and Gyma Laboratories of America Inc., a distributor for Profarmaco, were also named as defendants in the lawsuit.

In exchange for the exclusive deal, Mylan agreed to pay the three companies a percentage of its gross profits on sales of lorazepam and clorazepate, according to the FTC brief.

To guarantee Mylan’s monopoly of the active ingredient in lorazepam, the company in 1997 allegedly approached SST, the U.S. distributor of lorazepam’s active ingredient produced by the Italian company Fabricci Italiana Sintetici (FIS). Mylan proposed an exclusive deal with SST in which the company would receive a percentage of its gross profits on lorazepam tablets. SST declined Mylan’s proposal but increased the price of FIS’s lorazepam sold to Mylan’s competitors by 19,000 percent shortly after Mylan raised its price in 1998, according to the brief.

The FTC alleged that in January 1998 Mylan raised the price of clorazepate and lorazepam tablets significantly without a concomitant increase in its costs. Overnight, wholesale purchasers saw the price of clorazepate tablets rise between 1,900 percent and 3,200 percent. A bottle of 500 tablets in the 7.5 mg size that sold for $11.36 was raised to $377, according to the brief. The price for lorazepam tablets rose between 1,900 percent and 2,600 percent depending on the bottle size and strength. For example, a bottle of 500 1 mg tablets that sold for $7.30 cost $191, according to the brief.

"Because of these substantial and unprecedented price hikes, many purchasers including pharmacies, hospitals, insurers, managed care organizations, wholesalers, government agencies, and others have paid substantially higher prices," the FTC maintained.

Patients paid even higher prices for lorazepam and clorazepate tablets forcing some of them to stop taking the drugs completely or reduce the quantity taken, alleged the FTC.

The drastic price hikes had the greatest impact on the elderly who are in nursing homes and hospices and were prescribed the drugs for chronic anxiety.

According to the FTC, physicians issue more than 18 million prescriptions for lorazepam tablets annually and 3 million prescriptions for clorazepate tablets.

Patricia Sunseri, Mylan’s vice president for investor and public relations, told Psychiatric News, "We deny any wrondoing. We have never had an exclusive deal with Profarmaco, so we are not discontinuing our contract with the firm. After we raised prices in late 1997, other companies that stopped making the drugs got back in because they realized they could make money. Since our initial price hike, the wholesale price of lorazepam and chlorazepate has declined by about 20 percent per quarter. We are not responsible for what the wholesalers charge customers," said Sunseri.

Richard Parker, director of the FTC Bureau of Competition, told Psychiatric News, "I cannot comment on the Mylan contract with Profarmaco until the settlement is final." The lawsuit sought a permanent injunction against Mylan’s exclusive contract. At press time it was unclear whether the FTC would seek the injunction as a condition of the final settlement.

Regardless of whether there is an injunction, the Mylan case sets a precedent in FTC history for obtaining monetary relief from defendants. U.S. District Judge Thomas Hogan ruled last year that the FTC could seek "disgorgement of ill-gotten gains" in antitrust cases. The legal term means the defendant has to pay back some or all of its ill-gained profits to those who suffered from its profit-making scheme.

The ruling allows the FTC to reimburse patients who cannot sue drug companies under antitrust laws because they are not the direct purchasers of the drugs.

The FTC estimated the cost of reimbursement in the Mylan case to be in excess of $120 million. Mylan has tentatively agreed to pay $135 million, of which about $100 million will go to the 33 states and the District of Columbia, which filed a joint lawsuit with similar charges in U.S. District Court, and $35 million will go to private individuals and insurers who filed a similar class-action lawsuit, according to Mylan. Mylan will pay $12 million in attorney fees.

The terms of the final settlement are subject to court and FTC approval.