Herbert Hovenkamp, Dec 13, 2011
In Lundbeck the Eighth Circuit affirmed a district court’s decision approving a merger of the only two drugs authorized to treat a rare but serious heart condition in infants. When the acquisition occurred Lundbeck owned a patented drug called Indocin IV, which at the time was the only drug approved by the FDA to treat this condition. It then acquired the rights to NeoProfen, a drug that had been developed but was still awaiting FDA approval. The two drugs were not bioequivalents, and had different ingredients and side effects. When approval was granted Lundbeck introduced the new drug at a price some 1300 percent higher than the price of its older drug Indocin IV, and also raised the price of Indocin IV to about the same level.
Generic alternatives to Indocin IV became available in 2010, but until that time Lundbeck owned all approved drugs for treating this condition. Prior to the acquisition Merck, the former owner of Indocin IV, had charged $77.77 per treatment. After it owned both drugs Lundbeck raised the price of Indocin IV to $1614.44 and the price of NeoProfen was set at $1450 per treatment, eventually rising to $1522.50. Prior to its approval, the price of NeoProfen had been forecast at roughly $450 to $500 per treatment; however, this was in an environment in which the price of Indocin IV was under $80.