California Attorney General Edmund G. Brown Jr. settled an antitrust lawsuit on Monday that charged Barr Pharmaceuticals with taking $20 million for keeping off the market a cheaper, generic version of the oral contraceptive Ovcon.
“Barr illegally kept its generic drug off the market in exchange for $20 million from Warner Chilcott, thereby keeping drug prices higher,” said Attorney General Brown. “Today’s agreement ensures that these pharmaceutical companies will not collude to keep affordable medications away from consumers,” Brown added.
In 2005, California and 33 other states and the District of Columbia sued Barr Pharmaceuticals and Warner Chilcott for entering into an illegal arrangement by which Barr agreed not to sell generic Ovcon for five years in exchange for $20 million. The states’ alleged that the agreement violated state and federal antitrust laws and artificially inflated the price of Ovcon.
The California AG’s office said that non-competition agreements, as well as pharmaceutical industry practices including efforts to steer consumers to more costly medications, have increased the average retail price of prescription medications 8.3 percent annually, triple the rate of inflation.
In 2003, Warner Chilcott made approximately $61 million from sales of brand name Ovcon. In 2005, the company reported a 16 percent increase in annual revenue from Ovcon sales.
After the states filed their lawsuit, Warner Chilcott voided its agreement with Barr, opening the door to competition between the two companies. Within one month of restoring competition in late 2006, the Ovcon price dropped 18 percent, from $39 to $32. As of May 2007, Ovcon prices were down to $20, a total drop of nearly 50 percent.
Under the settlement, Barr will not enter into non-competition agreements with companies that sell brand name drugs. In addition, a 10-year consent decree with California requires Barr to provide the state with copies of any future related agreements. Without the consent decree such agreements have traditionally been kept secret between the companies. Barr will also pay California approximately $500,000 in statutory penalties and attorneys’ fees.
Previously, California reached a similar settlement with Warner Chilcott, which bars the company from entering non-competitive agreements with generic drug manufacturers.
Americans spent $275 billion on prescription drugs in 2006, expenditures expected to grow about 8 percent per year. Between 1994 and 2005, the total volume of drugs prescribed grew 71 percent according to a Kaiser Family Foundation analysis.
Source: California Office of the Attorney General
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