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

February 2, 2001 Media Inquiries: Sean Caine 410-576-6357

Final Settlement Reached in Pharmaceutical Price-Fixing Scheme

Baltimore - Attorney General J. Joseph Curran, Jr., announced that a national $100 million settlement with pharmaceutical giant Mylan Laboratories has been finalized and filed with U.S. District Court Judge Thomas F. Hogan in Washington, D.C. State attorneys general and the Federal Trade Commission accused Mylan in 1998 of orchestrating an illegal astronomical price increase - more than 2000 percent - for two generic drugs, lorazepam and clorazepate, used to treat Alzheimer’s disease and other afflictions. The resulting spike in pharmaceutical prices 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.

Under terms of the settlement, $28 million of the settlement funds will be earmarked for reimbursement to state agencies nationwide damaged by the price increase. Under the terms of a formula agreed to by the states, Maryland will receive approximately $445,000 to reimburse its state programs.

The remaining $72 million will be made available for a nationwide distribution to individual consumers injured by the price increases. A plan to identify and distribute funds to those consumers will be submitted to the District Court within 90 days. Once the court grants approval to the states’ distribution plan, nationwide notice will be published, and a settlement administrator will supervise the process of refunding claims. Attorney General Curran will ask the Court to approve a consumer claims period of 90 to 120 days. Any funds left over after individual claims are processed will likely be distributed by the states to charitable organizations benefitting the elderly, with the approval of the court

In addition to the payment of restitution and damages in the settlement, 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 already-high cost of prescription drugs is a national concern," Attorney General Curran said. "That companies got together to hike prices by more than 2000 percent–for drugs needed by people suffering from Alzheimers–is not only illegal, it is just plain wrong. We will not sit back and allow people to be gouged."

In 1998, 33 state attorneys general 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.

In a landmark decision issued by the District Court in July 1999, the court found that FTC has the legal authority to seek monetary remedies such as the disgorgement of ill-gotten profits, which this case sought. The $100 million settlement includes both recovery of damages and restitution by the states, and the disgorgement pursued by the FTC.

Profarmaco S.r.l. is a wholly-owned subsidiary of Cambrex Corporation, a U.S. 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.

The trial was scheduled to begin in the spring of 2001. Attorneys representing the states 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 original group of state attorneys general that sued Mylan included AK, AR, CA, CO, CT, DC, FL, ID, IL, IA, KY, LA, ME, MD, MI, MN, MO, NM, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VT, WA, WV, and WI.

Antitrust attorneys from Ohio, Maryland, and Kentucky will oversee enforcement of the non-monetary settlement provisions on behalf of the 51 attorneys general.