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Executive Summary

FTC/SANDOZ PROPOSED SETTLEMENT REGARDING CLOZARIL marketing "could result in civil penalties of up to $ 10,000 a day for each violation," the Federal Trade Commission said in a June 20 press statement. In addition, the proposed settlement commits the company to an open distribution system by prohibiting future "tying" of Clozaril sales to patient monitoring services provided under contract to Sandoz. Last month Sandoz opened distribution of the antischizophrenic drug (clozapine) and ended the exclusive Clozaril Patient Management System (CPMS) involving Baxter subsidiary Caremark and Roche Laboratories ("The Pink Sheet" April 1, T&G-2). FTC said requirements for purchasers under CPMS constituted an "unfair method of competition in violation of Section 5 of the FTC Act." The proposed order notes, however, that the agreement "is for settlement purposes only and does not constitute an admission by [Sandoz] that the law has been violated as alleged in" an accompanying draft court complaint. The agreement was drafted on the staff level by FTC and Sandoz and signed on April 25. The commission approved it for release on June 20 and ordered its publication in the Federal Registerwhich is expected early in the week of June 24. The public will have 60 days to comment on the proposed agreement. The draft complaint will not be filed in court if the agreement becomes final. The agreement will have no effect on state attorneys general lawsuits against Sandoz. The draft complaint maintains that Sandoz' conduct allowed it "to restrain trade unreasonably and injure purchasers of clozapine in the U.S." by forcing the purchase of CPMS services, by preventing other health care providers from providing their own services in connection with clozapine dispensing, by "restraining competition," and "by raising the cost of clozapine treatment." An FTC analysis of the proposed consent order notes that "there are approximately 200,000 refractory schizophrenic patients in the U.S." for whom "there is no substitute for clozapine." FTC disclosed the binding nature of Sandoz' CPMS with relation to its partners as well as to patients and other providers. The complaint states that Sandoz had "entered into a 15-year contract with Caremark, Inc." and "an exclusive 10-year contract with Roche Biomedical Laboratories." Terms of the contracts were such that neither Caremark nor Roche could provide clinical monitoring or laboratory services "for manufacturers or patients utilizing any form of clozapine not sold by Sandoz." Further, the complaint asserts, Caremark had agreed not to perform "services in connection with any antipsychotic drug that could compete with Clozaril." The agency charged that Sandoz "received a direct economic benefit" from tying sales of clozapine to CPMS in that it was able to set the retail price for the drug and service at $ 172 per week per patient, "without regard to the actual dose of clozapine the patient required." The complaint further charges that Sandoz "intended" CPMS "to increase its profits and to deter generic pharmaceutical manufacturers from entering the market after Sandoz' period of exclusivity expired" in 1994.

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