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SANDOZ AND CAREMARK SETTLE CLOZARIL ANTITRUST CASE WITH $20 MIL. FUND

Executive Summary

SANDOZ AND CAREMARK SETTLE CLOZARIL ANTITRUST CASE WITH $20 MIL. FUND for distributing refunds and credits to purchasers of the treatment for refractive schizophrenia, the companies announced Sept. 3. First filed in New York federal court in December 1990 and eventually joined by 34 states, the suit charged Sandoz with antitrust violations in relation to its now-defunct Clozaril Patient Management System that required patients to undergo once-weekly testing by Baxter's Caremark subsidiary for the potentially fatal side effect of agranulocytosis. Under the settlement, $10 mil. will be set aside for refunds and credits to participants in the Clozaril Patient Management System between February 1990 and May 1991. Specifically, purchasers will be reimbursed $38 of the $172 they were charged each week for the drug and blood testing under the CPMS. The bulk of these reimbursements will probably go to state health and mental health programs that provided coverage to indigent Clozaril patients. In addition, the fund will distribute another $3 mil. to the states to provide treatment to patients who may not be eligible for coverage under Medicaid or other state programs. All 50 states will share in the proceeds. The fund is also providing $3 mil. to the National Organization for Rare Disorders for charitable purchases of the drug. The remaining $4 mil. will go to legal and administrative costs. "We are confident that the distribution system for Clozaril therapy...would have been found to be within the letter and spirit of the antitrust laws," Sandoz President and CEO Tim Rothwell stated in a Sept. 3 release. While noting that "within the settlement agreement, Sandoz explicitly denies all liability in the matter," he insisted that "a protracted dispute would limit patient access to this important therapy, and, therefore, [Sandoz] considered a speedy resolution to be within the best interests of patients and the company." Caremark said it continues to monitor "several thousand" Clozaril patients in 40 states. The company has identified 119 cases of agronulocytosis to date. Caremark VP Jim Mieszala commented that: "While the recent legal action brought some attention to the virtues of clozapine, it has so far produced little improvement in access to the drug and certainly no new national system of care" for the mentally ill. Sandoz says approximately 28,000 people were being prescribed Clozoril as of June 30. The settlement agreement was preliminarily approved on Sept. 3 by Chicago Federal Court Judge Harry Leinoweber. He has set a hearing for final approval of the settlement on Nov. 20. Sandoz eliminated required participation in CPMS in December 1990, allowing Clozaril patients to instead receive blood monitoring from alternative sources. The antitrust suit was filed one day later, with the states charging that Sandoz' cost for Clozaril represented only $500 of the annual cost of therapy of nearly $9,000, and alleging that the company intended to boost its profits by collecting half of CPMS revenues ("The Pink Sheet" Dec. 24, 1990, p. 16). In settling the suit, Sandoz avoids the possibility of greater monetary damages and the loss of proprietary rights to Clozaril. In their suit, the states also sought to eliminate the monitoring system altogether, recover as much as $100 mil. in treble damages and compel Sandoz to license third parties to manufacture Clozaril. The settlement also apparently closes the last chapter on Sandoz' legal problems with the CPMS. On July 30, Sandoz entered into a consent agreement with the Federal Trade Commission under which the company is prohibited from requiring purchasers "to buy other goods or services from Sandoz or anyone designated by Sandoz" ("The Pink Sheet" Aug. 3, T&G-15).
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