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Klobuchar's Concerns about Price-Gouging Lead to Federal Action Against Pharmaceutical Company

December 16, 2008

Minneapolis, MN – Acting on a complaint brought by U.S. Senator Amy Klobuchar, the Federal Trade Commission (FTC) announced today that it is taking legal action against a pharmaceutical company for monopolistic practices and price-gouging in connection with a life-saving medication needed to treat premature infants with heart problems.

“The rising cost of health care is bad enough without the added problem of price-gouging by a drug company,” said Klobuchar.  “Pharmaceutical medicines are a remarkable success story of American science, but it’s not a license for a drug company to break the law to take advantage of sick and vulnerable babies.”

Earlier this year, Minneapolis Children’s Hospital contacted Klobuchar about a sudden and dramatic price increase for intravenous indomethacin.  It is the standard nonsurgical treatment for patent ductus arteriosis, known as PDA, a disorder that prevents holes from healing in the hearts of premature infants. 

Three years ago, Ovation Pharmaceuticals, an Illinois-based company, bought the rights to intravenous indomethacin, sold under the name Indocin I.V.  It also bought the rights to NeoProfen, the only other drug approved to treat PDA.

Soon after, Ovation suddenly increased the price of Indocin I.V. by nearly 1,300 percent, from $108 to $1,500 per course of treatment.  The price for NeoProfen was similar.

As a member of the Senate Commerce Committee, Klobuchar took the hospital’s concerns to the FTC and requested an investigation of Ovation for anti-competitive practices.

Today, in U.S. District Court in Minnesota, the FTC charged Ovation with violating federal antitrust laws and artificially inflating the price of the two drugs.

The FTC is seeking a severe remedy from Ovation.  The company would be forced to divest itself of one of the drugs and give up (or “disgorge”) the ill-gotten profits from its monopolistic pricing of the two drugs.

In coordination with the FTC, Minnesota Attorney General Lori Swanson is filing a similar complaint against Ovation.

“Children’s Hospitals and Clinics of Minnesota is grateful to Senator Klobuchar for shining a national spotlight on the questionable practices of certain pharmaceutical companies," said Alan L. Goldbloom, president and CEO of Children’s of Minnesota.  “By charging exorbitant prices for drugs used to treat life-threatening conditions in infants, these companies were taking advantage of some of the most vulnerable members of our population, and driving up health costs unnecessarily.”

Federal Trade Commissioner Jon Leibowitz said:  “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.”

Klobuchar added:  “A company like Ovation knows that, when it comes to saving a baby’s life, price is no object. They literally banked on it.  But the FTC is now knocking on their door and demanding that they return the money they gained illegally.”

In July, Klobuchar chaired a Joint Economic Committee hearing on pricing practices in the pharmaceutical drug industry.

Klobuchar noted that researchers at the University of Minnesota College of Pharmacy have found many examples of “extraordinary” drug price increases, defined as cases where the price at least doubles overnight.  The incidence of these price increases has been rising sharply in recent years.

“I hope the FTC action against Ovation sends a strong signal to other drug companies that they must not charge extortionate prices,” said Klobuchar.  “It’s crucial that medicines used to treat serious diseases remain affordable to those who need them the most.”

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