Risk & Compliance

FTC Alleges Ovation Has Baby-drug Monopoly

Pharmaceutical company raised price of heart-defect medication 1,300 percent after it acquired the product's only competitor, the agency charges. B...
Kate PlourdDecember 16, 2008

The Federal Trade Commission sued Ovation Pharmaceuticals Inc. for antitrust violations over its 2006 acquisition of the drug NeoProfen — which the FTC said sealed a monopoly in the market for products that treat a life-threatening heart defect in premature babies.

The complaint, filed in U.S. District Court in Minnesota, charged that when Deerfield, Ill.-based Ovation purchased NeoProfen from Abbott Laboratories, Ovation already owned the rights to Indocin, the only other drug that treats the condition. That drug had been purchased from Merck in 2005. By acquiring NeoProfen and giving it ownership of the only two drugs on the market to treat the condition, Ovation forced hospitals to pay monopoly prices for the drug, the FTC said.

After Ovation purchased the drug, it raised the price of Indocin 1,300 percent, taking the cost of a vial from $36 to almost $500. Prior to the raises, NeoProfen had been priced at the same rate as Indocin.

While federal law requires larger mergers and acquisitions to be reported to federal antitrust authorities, Ovation’s purchase of NeoProfen wasn’t large enough for reporting to be mandated. Thus, it went through despite Ovation’s alleged lock on the market, according to regulators. The complaint says that Ovation anticipated that NeoProfen would take a significant portion of Indocin’s sales and decided to purchase it.

The four FTC commissioners unanimously moved to sue the company for violating the provision of the Clayton Antitrust Act, which prohibits mergers or acquisitions that reduce competition. The FTC is seeking divestiture and disgorgement of profits Ovation obtained from the sales of Indocin and NeoProfen at the monopoly prices.

In a statement on the suit, FTC commissioner Jon Leibowitz wrote that “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.”

In a statement provided to CFO.com, Ovation disputed the FTC’s claims and said that it believes NeoProfen is superior to Indocin and not interchangeable for more infants with the heart condition. The company also said it would demonstrate in court that the FTC’s allegations and claims are with out merit.