[Ip-health] FTC Alleges Price Gouging, Monopoly For Baby Medicines

[James Love]

http://www.keionline.org/blogs/2008/12/17/gouging-monopoly-baby-medicines/

FTC Alleges Price Gouging, Monopoly For Baby Medicines

This was the title the Washington Post today gave the AP story.
http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121602674.html

This was the title of the FTC Press release:
http://www.ftc.gov/opa/2008/12/ovation.shtm

Press Release: December 16, 2008
FTC Sues Ovation Pharmaceuticals for Illegally Acquiring Drug Used to
Treat Premature Babies with Life-Threatening Heart Condition: Unlawful
Acquisition Resulted in Nearly 1,300 Percent Price Hike; Agency Asks
Court to Require Company to Give Up Unlawful Profits.

Here are a few paragraphs rom the release:

    Ovation, a privately owned corporation based in Deerfield, Illinois,
sells pharmaceuticals in more than 85 countries, including the United
States. In August 2005, Ovation purchased the rights to Indocin from
Merck. At that time, NeoProfen was awaiting regulatory approval by the
Food and Drug Administration. According to the FTC's complaint, Ovation
expected that NeoProfen, once approved, would take a substantial portion
of sales from Indocin. To eliminate the threat that NeoProfen posed, the
Commission charges, Ovation acquired the U.S. rights to NeoProfen from
Abbott Laboratories in January 2006. The NeoProfen transaction fell
below the regulatory threshold for reporting acquisitions to the federal
antitrust authorities.

    By acquiring NeoProfen, the complaint alleges, Ovation preserved its
U.S. monopoly in drugs used to treat patent ductus arteriosus in
premature babies. Following the acquisition, Ovation promptly raised the
price of Indocin to nearly $500 per vial, and when it introduced
NeoProfen, set the price at virtually the same level. Merck supplied
Indocin to Ovation for a small fraction of the price Ovation charges.
Nearly three years later, Ovation continues to charge artificially high
prices for both Indocin and NeoProfen. The FDA approved a generic
version of Indocin in July 2008, but to date it has not entered the
market.

    Because there are no other drugs available to treat patent ductus
arteriosus, hospitals treating babies with this critical condition have
no choice but to pay Ovation's monopoly price. And ultimately, the
artificially high prices paid by hospitals are passed on to families,
government programs such as Medicaid, and other public and private
purchasers.

    The Commission vote approving the complaint was 4-0, with
Commissioners Jon Leibowitz and J. Thomas Rosch issuing separate
concurring statements. In his statement Commissioner Leibowitz wrote,
"Ovation's profiteering on the backs of critically ill premature babies
is not only immoral, it is illegal. Ovation's behavior is a stark
reminder of why America desperately needs health care reform and why
vigorous antitrust enforcement is as relevant today as it was when the
agency was created almost one hundred years ago in 1914."

    Commissioner Rosch's concurring statement explains that like
Commissioner Leibowitz, he would have also voted to challenge Ovation's
earlier acquisition of Indocin. Commissioner Rosch wrote ". . . there is
reason to believe that Merck's sale of Indocin to Ovation had the effect
of enabling Ovation to exercise monopoly power in its pricing of
Indocin . . . [and] had the effect of substituting Ovation, a firm that
had an incentive to protect its ability to engage in monopoly pricing,
for Merck, which lacked the same incentive." Commissioner Rosch added,
". . . it is hard to imagine a more compelling case for application of
this legal theory."