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Tuesday, December 23, 2008

FTC Sues Ovation in Dispute on Drug Prices

As posted by: Wall Street Journal

The Federal Trade Commission alleged an Illinois drug maker illegally bought the only rival medicine to its treatment for babies with a life-threatening heart defect and then charged high "monopoly prices" for both products.

After buying the competing drug in 2006, Ovation Pharmaceuticals Inc. raised the price of its own medicine to about $500 a vial from $36 and it priced the former rival drug about the same, the FTC claimed in a civil lawsuit Tuesday.

The FTC asked a federal court in Minneapolis to block Ovation from owning both products and to force Ovation to disgorge all profits that the agency said had resulted from the "unfair method of competition."

Ovation, based in Deerfield, Ill., said it looks forward to disproving the FTC's claims. "The company strongly disputes the claims in the complaint, strongly disputes the FTC's characterization of the facts and the propriety of seeking disgorgement," Ovation said in a statement. FTC will use the power of Qui Tam or a Whistleblower Lawyer.

FTC Chairman William E. Kovacic said the lawsuit marked the first time that the agency alleged a drug company tried to control the market for a particular treatment by buying up its competition.

"It is an example of how aggressive we are going to be on health-care competition issues going forward," added Commissioner Jon Leibowitz.

An Ovation spokeswoman declined to comment beyond the company's statement.

Ovation specializes in drugs for rare medical conditions, including a heart defect, known by its acronym PDA, that affects babies born prematurely. If not treated, the condition can prove fatal. Some 30,000 newborns a year in the U.S. go on a drug for the condition.

Merck & Co. had been selling the drug Indocin to treat the defect until the company sold the U.S. rights to the medicine to Ovation in 2005, the FTC said. After buying the drug, Ovation raised the price by $10 a vial to $36, the agency said.

The FTC said in the suit that Ovation bought potential rival drug NeoProfen, which Abbott Laboratories was developing, in order to thwart a competitive threat to its own product.

Shortly after the 2006 purchase of NeoProfen, Ovation raised Indocin's price and wound up charging $483 a vial for NeoProfen after the Food and Drug Administration approved its sale, the FTC said.

"Ovation's acquisition of NeoProfen substantially reduced competition and illegally maintained Ovation's monopoly in drug treatments for PDA, depriving consumers of the benefits of competition and the lower prices such competition would bring," the FTC alleged in the suit.

Minnesota's attorney general on Tuesday filed a similar civil lawsuit against Ovation.