Attorney General Thurbert Baker announced today that Georgia, along with all other states and the Federal Trade Commission (FTC), entered into a $100 million settlement with Mylan Laboratories. State Attorneys General and the FTC accused Mylan of engaging in an illegal scheme to fix prices for two generic drugs, lorazepam and clorazepate, used to treat Alzheimer’s disease and other afflictions. The settlement was finalized and filed with U.S. District Court Judge Thomas F. Hogan in Washington, D.C. this morning. The $100 million includes both recovery of damages and restitution by the states and the disgorgement of ill-gotten profits pursued by the FTC.
The alleged illegal scheme resulted in an astronomical 2000 percent increase in the cost of the drugs. 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.
“The facts surrounding this case are particularly troubling, because they involve a scheme to illegally fix the prices of drugs so many vulnerable people depend on,” Baker said. “I am gratified that we were able to reach a settlement that will reimburse consumers and taxpayers for the losses they suffered as a result of this illegal activity,” he continued.
Of the $100 million Mylan has agreed to pay, $72 million will be made available for a nationwide distribution to individual consumers injured by the price increases. Georgia consumers are estimated to be eligible for $3.5 million in recovery, but no cap is placed on the amount consumers of any state can receive. 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 Baker 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 benefiting the elderly, with the approval of the court.
The remaining $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, Georgia will receive approximately $ 73,661.24 to reimburse its state health programs.
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.
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. The suit was closely coordinated with a similar lawsuit filed by the Federal Trade Commission (FTC). Eighteen additional states, including Georgia, have now joined the states’ lawsuit and settlement. Senior Assistant Attorney General Harold Melton and Assistant Attorney General Robin Ginsburg Cohen represented Georgia in the litigation.
A trial was scheduled to begin in Federal District Court in Washington 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.