Office of Maryland Attorney General J. Joseph Curran, Jr.

July 13, 2000 Media Inquiries: Sean Caine 410-576-6357

State Attorneys General And Federal Trade Commission Recover $100 Million From Prescription Drug Manufacturer
Settlement in Principle Estimated To Net Maryland More Than $1 Million

Baltimore - Attorney General J. Joseph Curran, Jr., announced today that two lawsuits filed by Maryland and 32 other State Attorneys General and the Federal Trade Commission (FTC) have been settled in principle for $100 million by pharmaceutical giant Mylan Laboratories and three other defendants. The 1998 lawsuits alleged an illegal astronomical price increase for two drugs, lorazepam and clorazepate, used to treat Alzheimerís disease and other afflictions.

Under the terms of the agreement, it is estimated that Maryland will receive between $1 million and $1.5 million to reimburse the stateís government programs and to benefit consumers who have paid inflated prices for the Mylan products in question.

"Our investigation has shown that this illegal conduct has harmed Maryland consumers," Attorney General Curran said. "What makes this behavior even more unconscionable is that these drugs are frequently prescribed for elderly, nursing home and hospice patients, including those suffering from long-term debilitating conditions such as Alzheimer's disease. Moreover, a great many of the patients are uninsured senior citizens on fixed incomes."

The states, in coordination with the FTC, filed parallel lawsuits to protect consumers from a price-fixing and monopolization scheme led by Mylan. The $100 million settlement in principle includes both recovery of damages by the states, and the forfeiture sought by the FTC. In addition to the amount of restitution and damages of the settlement, Mylan has 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 $100 million settlement in principle includes both recovery of damages by the states and the forfeiture sought by the FTC.

The lawsuits alleged that Pittsburgh-based Mylan developed a plan in late 1997 to drastically increase prices on two of the 91 generic drugs it manufactured, lorazepam and clorazepate, by cutting off its competitorsí supply of the drugsí active ingredients. Mylan accomplished this by entering into long-term profit sharing agreements with industry suppliers and distributors that gave Mylan the only reliable sources of the active ingredients.

Having excluded all real and potential competitors, Mylan then promptly increased its prices on the two widely prescribed sedatives more than 2,000 percent. That act nearly single-handedly led to a 0.2 percent increase in the May 1998 national Producer Price Index, which the federal government uses to monitor national economic health.

In January 1998, Mylan raised the price of clorazepate more than 2,200 percent. Clorazepate is a generic version of Abbott Laboratoriesí Tranxene that is prescribed nearly three million times each year in the United States. The price jump translated to an increase from $22.72 to $754 for a 1,000-tablet supply of the drug.

Two months later, Mylan raised the price of lorazepam more than 2,000 percent. Lorazepam is a generic version of Wyeth-Aherstís Ativan that is prescribed nationally more than 17 million times each year. That led to an increase from $13.60 to $378 for a 1,000-tablet bottle of the drug. 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 have been calculate at $158 million.

Following the price increases, members of Congress called for an FTC investigation into Mylanís business practices.

Final terms of the settlement with Mylan, expected to be completed within several weeks, are subject to approval by the FTC, the 33 state attorneys general, and U.S. District Court Judge Thomas F. Hogan. Mylanís board of directors has approved the terms of the settlement in principle. The three other defendants are New Jersey-based Cambrex Corporation, Italian pharmaceutical ingredient manufacturer Profarmaco S.r.l., and New York-based drug distributor Gyma Laboratories of America, Inc.

After Maryland joined the lawsuit in May 1999, Attorney General Curran took a lead role in the statesí litigation and settlement of the lawsuit, as did the States of Ohio and Florida. Other state attorneys general who sued Mylan are: AK, AR, CA, CO, CT, DC, ID, IL, IA, KY, LA, ME, MI, MN, MO, NM, NY, NC, OK, OR, PA, SC, SD, TN, TX, UT, VT, WA, WV, AND WI.

The trial was scheduled to begin in the Spring of 2001. Attorneys representing the states and the FTC had gathered information and evidence from drug wholesalers, retailers, competitors, public agencies, drug store chain retailers, and insurance companies in preparation for the court action.

The settlement announced today does not affect numerous pending class-action lawsuits filed by private attorneys on behalf of insurers and drug retailers.