Abbott faces more litigation over AIDS drug

Monday, August 4, 2008

SAN FRANCISCO — When Abbott Laboratories Inc. raised the price of a popular AIDS drug by 400 percent in 2003, executives prepared for the inevitable public relations hit, but assured themselves the backlash would be brief.

Nearly five years later, the accusations against Abbott are still flying.

The North Chicago, Ill., drug company stands to lose hundreds of millions of dollars in several pending antitrust lawsuits. It settled only its first — and likely its cheapest one — last week.

The lawsuits, all filed in Oakland federal court, accuse Abbott of raising the price of the HIV-fighting Norvir to illegally stifle competition and boost sales of its own alternative, Kaletra. Embarrassing internal communications between executives plotting how to thwart their rivals in the lucrative HIV drug cocktail market have been made public in the process.

Executives acknowledged in 2003 internal memos that Abbott would appear as the "big, bad, greedy pharmaceutical company" if they implemented the Norvir price increase, according to court documents.

But the bruising to the company's public image then led to legal woes, with a barrage of lawsuits filed by patients, drug wholesalers and one competitor.

Last week, Abbott agreed to pay between $10 million and $27.5 million to charities to settle one of the smaller lawsuits filed in 2004 by aggrieved HIV patients. The payout depends on how the company fares before the 9th U.S. Circuit Court of Appeals, which will be asked to settle several contentious antitrust questions raised in the case.

The payout in that lawsuit is expected to be small compared to potential settlements or losses in other cases because the amount was limited by federal law, which blocks "indirect" buyers — such as patients who purchase the drug through pharmacies — from collecting damages in antitrust litigation.

Abbott doesn't enjoy that same legal protection in the remaining lawsuits, filed by pharmacies, drug wholesalers and competitor GlaxoSmithKline PLC, who can argue to triple any antitrust awards they win. Those cases are still pending before Oakland-based U.S. District Court Judge Claudia Wilken, who so far has generally ruled against Abbott.

The central allegation by all plaintiffs is that Abbott raised the price of its pioneering drug Norvir to illegally dominate the market.

Norvir is a key ingredient — a "booster" — in many multidrug cocktails made by rival companies that HIV patients take to keep the disease at bay.

When Abbott increased Norvir's cost, it effectively raised the prices of its competitors' drugs. At the same time, Abbott kept the price the same for its own multidrug pill, Kaletra, which contains Norvir.

Corporate documents produced in court showed Abbott executives hoped that the price increase in 2003 would boost sales of Kaletra at the expense of two rival drugs coming on the market that year. The documents also showed that executives were considering other options to persuade doctors to prescribe Kaletra rather than competing drugs.

Abbott spokeswoman Melissa Brotz said the proposals other than a price increase were "never seriously considered."

Brotz contended that Abbott increased Norvir's price to reflect its unintended role as a booster drug rather than a stand-alone treatment.

The Food and Drug Administration approved Norvir in 1996 for use as a standalone AIDS treatment and the drug's average daily cost per patient was $18. But the drug had a number of side effects, and soon doctors were prescribing rival drugs to their patients.

Then Abbott scientists discovered that Norvir worked wonders in significantly lower doses as a booster taken with the rival drugs, and its popularity soared as a key ingredient to many multidrug cocktails.

By 2003, however, Norvir's average daily cost had plummeted to $1.71 per patient.

On Dec. 3, 2003, Abbott announced that it would raise the average daily cost of Norvir from $1.71 to $8.57.

The central issue now before the court is why.

Abbott contends in court papers it raised the price "for one reason: to get more revenue from the sale of Norvir."

The plaintiffs, though, contend the company's motives were much more sinister.

"Abbott's Dec. 3, 2003 price increase was an attempt to leverage its monopoly position in the boosting market in order to disadvantage competitors and maintain its dominant position in the boosted market," lawyers for Safeway Inc. allege in the grocery chain's lawsuit.

No trial dates have been set.

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