Internal memos compare medicine industry to OPEC U.S. judge reveals details in ordering trial of lawsuit

April 14, 1996|By NEW YORK TIMES NEWS SERVICE

CHICAGO -- Providing a rare look at internal discussions in the pharmaceutical industry, a federal judge has quoted from sealed industry documents that compare the industry to a cartel, or "kind of an OPEC," which, the judge said, shared information on pricing and competition.

Judge Charles P. Kocoras of U.S. District Court in Chicago included the remarks in a 76-page decision he issued last week in ordering a trial of drug manufacturers in a lawsuit brought by independent retail pharmacies.

They accuse 22 drug makers of illegally conspiring to fix prices by offering discounts to health maintenance organizations and others but not to retail pharmacies.

The drug companies deny any wrongdoing. They say the retailers do not get the discounts because pharmacies do not influence sales volume and market share.

"We've granted discounts to certain customers who have demonstrated ability to help us sell more of our products, a result of rational independent business behavior, not collusion," Edward A. West, a spokesman for Eli Lilly & Co., said Friday.

Lawyers for the pharmacies said hundreds of documents detailing industry practices had been produced since the class-action suit was filed in October 1993. All these documents are sealed, but Judge Kocoras quoted from a number of them.

The judge said it was "unquestionable" that the companies "had the opportunity to conspire." He added that there was "evidence of seminars and trade association meetings, which virtually every defendant attended at one time or another, and a coordinated exchange of pricing and other competitive information shared among the manufacturers."

An internal memorandum from the files of Abbott Laboratories alluded to the Pharmaceutical Manufacturers Association, a trade group, as "kind of an OPEC" -- the Organization of Petroleum Exporting Countries.

The writer, who was not identified, was summarizing a discussion about whether to provide discounts to mail-order drug distributors.

The first participant "that breaks away from the cartel will reap the maximum advantage," the Abbott memorandum said. It added, "Of course, we do not want to be perceived by our brethren on the PMA as black sheep."

Judge Kocoras said, "Such evidence supports the plaintiffs' notions of manufacturer interdependence."

A spokesmen for Abbott declined to comment. Abbott Laboratories quit the Pharmaceutical Manufacturers Association, now called the Pharmaceutical Research and Manufacturers Association of America, in 1993.

At a follow-up hearing Thursday, Judge Kocoras indefinitely postponed the trial date and invited lawyers to comment on his ruling of April 4, when he ordered the trial.

The retail pharmacies say they are entitled to the same type of discounts on drugs that health maintenance organizations and hospitals get.

A recent study by an economist at the University of Minnesota, Stephen W. Schondelmeyer, said that giving such discounts to retailers could expand competition and reduce prices to consumers by 12 percent.

Pub Date: 4/14/96

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