NEW YORK, May 15, 2002 (PRIMEZONE) -- The United States Court of Appeals for the District of Columbia Circuit on May 14, 2002 issued an important decision upholding the certification of a nationwide class action on behalf of all direct purchasers of two widely prescribed generic drugs, lorazepam and clorazepate, against defendants Mylan Laboratories, Inc. (NYSE:MYL) and Mylan Pharmaceuticals, Inc. ("Mylan"). The decision denied a petition to appeal by Mylan. A copy of the decision in the In re Lorazepam and Clorazepate Antitrust Litigation is faxed herewith.
Mylan had argued on appeal that, if the class was upheld, it faced the "looming threat" of "daunting" damages in the amount of "(h)undreds of millions of dollars trebled." (Antitrust judgments are automatically trebled by law.)
The Court of Appeals rejected Mylan's argument that Mylan would be unduly pressured to settle. The Court of Appeals stated that Mylan's argument was unaccompanied by hard evidence that "the damages claimed would force a company of its size to settle." The Court of Appeals also reasoned that any pressure to settle was not independent of the "merits of the class's claims." Plaintiffs allege (as further described below) that Mylan, through an illegal scheme to corner necessary ingredients and by price fixing, raised the prices of the two popular, anti-anxiety drugs by more than 1900%.
The Court of Appeals also decided that on "the record before us," it "cannot conclude that there is manifest error in the district court's determination" that the plaintiffs and the Class have standing to recover treble damages under the antitrust laws. Nor was the District Court's certification of the class action "manifestly erroneous."
The Court of Appeals therefore declined to accept Mylan's appeal from the District Court's decision.
Plaintiffs allege that, by price fixing and monopolization, Defendant Mylan and its co-conspirators raised the prices of two widely prescribed, generic anti-anxiety drugs, lorazepam and clorazepate, by more than 1900%. The Mylan case shows that the generic drug industry is not immune from price fixing by drug manufacturers. Indeed, the Federal Trade Commission in its companion case (settled for $100 million) said that the Mylan price increases for lorazepam and clorazepate almost single-handedly pushed the government's Consumer Price Index up 0.2 percent.
Relevant Background
A generic manufacturer, such as Mylan, typically purchases an Active Pharmaceutical Ingredient ("API") from a specialty chemical manufacturer. Mylan purchased lorazepam and clorazepate API, manufactured by defendant Profarmaco, from defendant Gyma (Profarmaco's U.S. distributor).
In 1997, Mylan decided to raise clorazepate and lorazepam prices by cornering the supply of lorazepam and clorazepate API. Mylan entered into long-term, exclusive supply contracts with Profarmaco and Gyma, denying its competitors access to essential lorazepam and clorazepate API. (A manufacturer that wants to change its API supplier must obtain FDA approval, which can take as long as three years.)
Mylan also tried to obtain an exclusive agreement from defendant SST, although Mylan lacked FDA approval to use SST's API. Mylan attempted to eliminate this alternative source of lorazepam API, because certain competitors had regulatory approval to use it.
SST declined to enter into a written agreement, because of legal concerns. However, SST orally promised to be the "best partner" Mylan ever had. Mylan understood this meant that SST would raise its API price in coordination with Mylan's price increase.
Despite no substantial increase in its costs, Mylan immediately raised its price of clorazepate tablets to the Class by more than 1,900% to 3,900% (depending on bottle size and strength). Likewise, despite no substantial increase in its costs, Mylan soon raised its price of lorazepam tablets to the Class by more than 1,900% to 6,500 % (depending on bottle size and strength).
SST kept its "best partner" promise by raising its API price approximately 19,000%, guaranteeing that lorazepam manufactured by Mylan's competitors would match Mylan's new prices.
The four class representatives -- Advocate Health Care ("Advocate"), St. Charles Hospital and Rehabilitation Center ("St. Charles Hospital"), Dik Drug Company ("Dik Drug"), and Harvard Pilgrim Health Care, Inc. ("Harvard Pilgrim") -- brought this class action as a nationwide class defined as all non-governmental, direct purchasers.
Advocate is an Illinois not-for-profit corporation that is the largest fully integrated health care delivery system in metropolitan Chicago, operating eight hospitals and Chicago's largest physician network. St. Charles Hospital is a New York not-for-profit corporation offering a broad range of medical, surgical, and rehabilitation services at its community teaching and regional rehabilitation hospital.
Dik Drug is a wholesale distributor to over 900 independent retail pharmacies, hospitals, and nursing home providers. Harvard Pilgrim is a Massachusetts not-for-profit managed healthcare company and health maintenance organization providing health benefits to approximately 1.35 million members throughout New England.
Plaintiffs allege that, as a result of Mylan's illegal monopolization and price fixing, they and the other members of the direct purchaser class paid enormously higher prices. Under the Supreme court decision referred to by the Court of appeals, Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) direct purchasers have the right to recover three times the unlawful overcharge they paid.
For Additional Information
For additional information or answers to questions, please direct any inquiries to:
Arthur M. Kaplan FINE, KAPLAN AND BLACK, R.P.C. 1845 Walnut Street, 23rd Floor Philadelphia, PA 19103 (215) 567-6565 Michael D. Hausfeld COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C. 1100 New York Avenue, N.W. West Tower, Suite 500 Washington, D.C. 20005-3934 (202) 408-4600 Linda P. Nussbaum COHEN, MILSTEIN, HAUSFELD & TOLL PLLC 825 Third Avenue, 30th Floor New York, NY 10022-7519 (212) 838-7797 Thomas Campbell GARDNER, CARTON & DOUGLAS 321 North Clark Street, Suite 3000 Chicago, IL 60610-4985 (312) 644-3000 Stanley M. Grossman POMERANTZ HAUDEK BLOCK GROSSMAN & GROSS, LLP 100 Park Ave., 26th Floor New York, New York 10017 (212) 661-1100
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.