Last week, GlaxoSmithKline (NYSE:GSK) filed an antitrust lawsuit against Abbott Laboratories (NYSE:ABT) for Abbott’s 400% price increase for its AIDS drug, Norvir. Strangely, the complaint was filed over three years after PAL coalition member Service Employee International Union (SEIU) Health and Welfare Fund sued Abbott for substantially the same reasons. Glaxo’s reasons for waiting three years before throwing their hat into the ring is unclear, but it may have something to do with SEIU’s success so far in its case. A group of chain pharmacies filed a similar lawsuit last month (See our post, “Chain pharmacies sue Abbott over Norvir AIDS drug price increase”). As we said about that case:
What took these supermarkets so long? It’s almost 3 years later. The filing of the suit now may have been motivated by the fact that various states have 3 year statutes of limitations (the amount of time you can file a lawsuit after an alleged “wrong” has occurred) for various kinds of claims concerning alleged fraud. Three years would be up in this instance in about a month. These supermarkets may also have seen the progress of the SEIU suit and concluded that they have a viable case as well.
SEIU and several consumers filed a national class action lawsuit against Abbott for increasing the cost of Norvir by an unconscionable 400%. Norvir is a “protease inhibitor” (PI) and was initially used by itself. Later, it fell out of favor as a standalone PI, because of serious side effects. But it became very important because (at a lower dose) it “boosts” the effects of other PIs taken by HIV/AIDS patients when they are taken together. Abbott, in fact, combined Norvir with its own PI in a single “combination” pill, called Kaletra. So patients either take Norvir with other companies’ PIs, or they take Kaletra.
Because of its effectiveness as a booster, other drug companies began designing PIs to be administered specifically along with Norvir. Abbott, by increasing the cost of Norvir by 400%, effectively increased the price of all of competing PIs since each relied on Norvir to be effective. Then, to gain a stranglehold on the market, Abbott left unchanged the price of Kaletra.
Thus, Abbott forced HIV/AIDS patients to choose between paying much more for Norvir and another PI, and switching to Kaletra, a drug that may not be medically appropriate for them. Different PIs are important at different stages of the disease, so switching between them is not just a matter of switching from one equivalent drug to another.
The SEIU lawsuit has successfully overcome motions to dismiss and motions for summary judgment . Earlier this year, the judge granted class certification. A trial is scheduled to take place in June 2008.
While the SEIU case seeks to help patients and health plans who were forced to switch PIs or pay exorbitant prices for competing drugs, Glaxo’s case seeks to recover damages for lost market share and lost profits. Abbott hiked the price of Norvir soon after Glaxo released its PI, Lexiva.
Here at PAL, we’re more concerned with the effect that this price hike had on patients and health plans than its effect on a huge pharmaceutical giant like GlaxoSmithKline. However, the price hike might have affected other drug companies’ interest in developing new protease inhibitors, and thus may also have harmed patients indirectly, as well as directly. A drug company that knows that any new PI it might develop is at a serious price disadvantage compared to Kaletra (because of the artificially high price of Norvir) might decide to put its drug development priorities elsewhere.
The recently filed Glaxo and pharmacy suits mean that there’s now a strange set of bedfellows indeed aligned against the Norvir price hike: consumers, health plans, chain pharmacies and a major brand-name drug company. This “coalition of the overcharged” underscores just how reprehensible Abbott’s price hike was. Glaxo’s suit does thicken the plot considerably. We will keep you posted on further developments.