New York To Receive $2 Million In Drug Settlement

Attorney General Spitzer announced today that New York will receive $2.1 million as part of a nationwide $100 million settlement with Mylan Laboratories, a large generic pharmaceutical drug maker.

In the suit, 32 states and the Federal Trade Commission (FTC) alleged that Mylan illegally monopolized the generic market for the anti-anxiety drugs clorazapate and lorazapem, which led to price increases of up to 2000 percent.

In 1998, New York, the other states and the FTC, accused Mylan of orchestrating an illegal price increase for the generic 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 the nation's economic health. Following the price increases, members of Congress called for an FTC investigation into Mylan's business practices.

Of the $100 million settlement, $28 million will be earmarked for reimbursement to state agencies and programs harmed by the price increase, and New York itself will receive approximately $2.1 million to reimburse its Medicaid program. The remaining $72 million will be made available for a nationwide distribution to individual consumers injured by the price increases. Thousands of New Yorkers may have been affected by the price fixing. A plan to identify and distribute funds to those consumers will be submitted to the court within 90 days. Once the court approves the states' distribution plan, nationwide notice will be published, and a settlement administrator will supervise the process of refunding claims. Funds remaining after individual claims are processed will likely be distributed by the states to charitable organizations benefitting the elderly.

"This settlement should deter large generic pharmaceutical companies like Mylan from conspiring with suppliers to artificially inflate prices, which as was demonstrated on this case, could have a devastating impact on the people who depend on them most," Spitzer said. "We will be working with the other states to identify the New York consumers who were harmed and to ensure that they are reimbursed for the exorbitant prices they were forced to pay."

In addition to the payment of restitution and damages in the settlement, Mylan has agreed to include certain restrictions in its supplier agreements designed to restore competitive balance in the pharmaceutical market. Mylan has also agreed 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 FTC.

The $100 million settlement includes recovery of both damages and restitution by the states, and forfeiture 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, N.J. Gyma is a Westbury, N.Y. company that distributes pharmaceutical compounds for Profarmaco and other manufacturers. New Jersey-based SST Corporation is also a marketer to the pharmaceutical industry.

The case was handled by Assistant Attorneys General John A. Ioannou and Robert L. Hubbard, under the supervision of Antitrust Bureau Chief Harry First and Deputy Bureau Chief Kathleen L. Harris.