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FTC Sues Ovation Pharmaceuticals for Illegally Acquiring Drug Used to Treat Premature Babies with Life-Threatening Heart Condition

The Federal Trade Commission today filed a complaint in federal district court challenging Ovation Pharmaceuticals, Inc.’s January 2006 acquisition of the drug NeoProfen, which eliminated its only competitor for the treatment of a serious and potentially deadly congenital heart defect affecting more than 30,000 babies born prematurely each year in the United States. When it acquired NeoProfen, Ovation already held the rights to Indocin I.V., the only other drug used to treat this serious condition. After ensuring that it would not face competition from NeoProfen, Ovation promptly raised the price of Indocin nearly 1,300 percent, from $36 to nearly $500 a vial. When it launched NeoProfen in July 2006, Ovation set a similarly inflated price.

“By acquiring its only competitor in the treatment of a serious heart condition affecting premature babies, Ovation has been able to charge dramatically higher prices for its drugs,” said Acting FTC Bureau of Competition Director David P. Wales. “While Ovation is profiting from its illegal acquisition, hospitals and ultimately consumers and American taxpayers are forced to pay millions of dollars a year more for these life-saving medications. The action taken today is intended to restore the lost competition and require Ovation to give up its unlawful profits.”

The FTC filed its complaint in the U.S. District Court for the District of Minnesota.
Indocin and NeoProfen are the only two pharmaceutical treatments sold in the U.S. for a condition known as patent ductus arteriosus, a disorder that primarily affects very low birth- weight premature infants. In babies with this condition, the blood vessel connecting two major arteries of the heart fails to close on its own soon after birth. Patent ductus arteriosus can be fatal if not treated. The only treatment other than drug therapy is surgery, which carries the risk of serious complications and costs far more than treatment with either Indocin or NeoProfen.

Ovation, a privately owned corporation based in Deerfield, Illinois, sells pharmaceuticals in more than 85 countries, including the United States. In August 2005, Ovation purchased the rights to Indocin from Merck. At that time, NeoProfen was awaiting regulatory approval by the Food and Drug Administration. According to the FTC’s complaint, Ovation expected that NeoProfen, once approved, would take a substantial portion of sales from Indocin. To eliminate the threat that NeoProfen posed, the Commission charges, Ovation acquired the U.S. rights to NeoProfen from Abbott Laboratories in January 2006. The NeoProfen transaction fell below the regulatory threshold for reporting acquisitions to the federal antitrust authorities.

By acquiring NeoProfen, the complaint alleges, Ovation preserved its U.S. monopoly in drugs used to treat patent ductus arteriosus in premature babies. Following the acquisition, Ovation promptly raised the price of Indocin to nearly $500 per vial, and when it introduced NeoProfen, set the price at virtually the same level. Merck supplied Indocin to Ovation for a small fraction of the price Ovation charges. Nearly three years later, Ovation continues to charge artificially high prices for both Indocin and NeoProfen. The FDA approved a generic version of Indocin in July 2008, but to date it has not entered the market.

Because there are no other drugs available to treat patent ductus arteriosus, hospitals treating babies with this critical condition have no choice but to pay Ovation’s monopoly price. And ultimately, the artificially high prices paid by hospitals are passed on to families, government programs such as Medicaid, and other public and private purchasers.

The Commission’s complaint charges that Ovation’s acquisition of NeoProfen substantially reduced competition in violation of Section 7 of the Clayton Act, and illegally maintained the company’s monopoly of drug treatments for patent ductus arteriosus in violation of Section 5(a) of the FTC Act. The Commission is seeking equitable relief, including divestiture and disgorgement of unlawfully obtained profits from Ovation’s sales of Indocin and NeoProfen.

The Commission vote approving the complaint was 4-0, with Commissioners Jon Leibowitz and J. Thomas Rosch issuing separate concurring statements. In his statement Commissioner Leibowitz wrote, “Ovation’s profiteering on the backs of critically ill premature babies is not only immoral, it is illegal. Ovation’s behavior is a stark reminder of why America desperately needs health care reform and why vigorous antitrust enforcement is as relevant today as it was when the agency was created almost one hundred years ago in 1914.”

Commissioner Rosch’s concurring statement explains that like Commissioner Leibowitz, he would have also voted to challenge Ovation’s earlier acquisition of Indocin. Commissioner Rosch wrote “. . . there is reason to believe that Merck’s sale of Indocin to Ovation had the effect of enabling Ovation to exercise monopoly power in its pricing of Indocin . . . [and] had the effect of substituting Ovation, a firm that had an incentive to protect its ability to engage in monopoly pricing, for Merck, which lacked the same incentive.” Commissioner Rosch added, “. . . it is hard to imagine a more compelling case for application of this legal theory.”

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.

Copies of the Commission’s complaint will be available soon from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 081-0156)
(Ovation.final.wpd)

Policy Planning Director Maureen Ohlhausen To Leave FTC; James Cooper Named Acting Director

Federal Trade Commission Chairman William E. Kovacic announced today that Maureen Ohlhausen, Director of the agency’s Office of Policy Planning for the past four years, will leave the agency, and that James Cooper, currently the Deputy Director, has been named Acting Director.

“For over a decade, Maureen has served this agency brilliantly,” Chairman Kovacic said. “Under her leadership, the Office of Policy Planning has helped to bring clarity and understanding to significant competition issues affecting a wide range of leading industries.” Ohlhausen, who began her career with the Commission in 1997, will become the Technology Policy Counsel at the Business Software Alliance, a nonprofit trade association that promotes innovation, growth, and a competitive marketplace for commercial software and related technologies.

Ohlhausen became the Director of the Office of Policy Planning in 2004, having served previously as its Deputy Director. At Chairman Kovacic’s request, in recent months she has led the agency self-assessment project, “FTC at 100: Into our Second Century.”

As head of the Commission’s Internet Access Task Force, Ohlhausen managed the FTC staff’s inquiry into net neutrality and oversaw a 2007 staff report, “Broadband Connectivity Competition Policy,” as well as a 2006 report, “Municipal Provision of Wireless Internet.” Other significant reports authored under her leadership include the joint FTC/Department of Justice report on “Competition in the Real Estate Brokerage Industry,” “Enforcement Perspectives on the Noerr-Pennington Doctrine,” “Accounting for Laws that Apply Differently to the U.S. Postal Service,” and “The Strength of Competition in the Sale of Rx Contact Lenses.” During her leadership, the Office also issued numerous state and federal advocacy filings.

From 1998 to 2001, Ohlhausen served as an attorney advisor for former FTC Commissioner Orson Swindle, advising him on competition and consumer protection matters. Before joining the agency’s General Counsel’s Office in 1997, she spent five years at the U.S. Court of Appeals for the D.C. Circuit, serving as a law clerk for Judge David B. Sentelle. Ohlhausen previously clerked for Judge Robert Yock of the U.S. Court of Federal Claims from 1991 to 1992.

Ohlhausen was graduated with distinction from George Mason University School of Law in 1991, having graduated with honors from the University of Virginia in 1984. She is a Senior Editor of the Antitrust Law Journal and a member of the ABA Task Force on Competition and Public Policy.

Kovacic also announced that James Cooper will serve as Acting Director of the Office of Policy Planning. Cooper joined the FTC in 2003, having worked at the Washington, D.C. law firm Crowell & Moring, where he practiced in the antitrust group. He graduated magna cum laude from George Mason University School of Law and was a member of the George Mason Law Review. Cooper also holds a Ph.D. in economics from Emory University. He has published articles on topics such as price discrimination, antitrust treatment of vertical relationships among firms, competition in the contact lens industry, and the theory of competition advocacy. Cooper also teaches a course on law and economics at the Johns Hopkins University’s graduate program in applied economics in Washington, D.C.

(OPP Changes)

Policy Planning Director Maureen Ohlhausen To Leave FTC; James Cooper Named Acting Director

(OPP Changes)

Mortgage Lender Agrees to Settle FTC Charges That It Charged African-Americans and Hispanics Higher Prices for Loans

A home mortgage lender has agreed to settle Federal Trade Commission allegations that it violated federal law by charging African-American and Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers – price disparities that cannot be explained by the applicants’ credit characteristics or underwriting risk.

According to the FTC’s complaint, Gateway Funding Diversified Mortgage Services, L.P., and its general partner, Gateway Funding Inc., based in Horsham Pennsylvania, violated the Equal Credit Opportunity Act (ECOA) in pricing both prime and subprime mortgage loans. The defendants gave loan officers nearly complete discretion to charge, in addition to the risk-based price, “overages” that included higher interest rates and higher up-front charges. The Commission alleges that Gateway paid loan officers a percentage of these overages and failed to monitor whether African-American and Hispanic consumers were paying higher overages than non-Hispanic white borrowers.

As stated in the complaint, Gateway’s policy and practice of allowing loan officers to charge discretionary overages resulted in African-Americans and Hispanics being charged higher prices because of their race or ethnicity – price disparities that are “substantial, statistically significant, and cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.”

“Unlawful discrimination in the pricing of mortgages is intolerable,” FTC Chairman William E. Kovacic said. “Discretionary pricing policies must be crafted and monitored carefully so that all applicants are treated fairly.”

The ECOA and its implementing Regulation B bar creditors from discriminating against applicants for credit on the basis of race, color, religion, national origin, sex, marital status, age, or the fact that an applicant’s income is derived from public assistance.

The proposed settlement bars the defendants from discriminatory lending practices and requires them to implement a fair lending training program, a comprehensive data integrity lending program designed to ensure accuracy and completeness of loan data, and a fair lending monitoring program that includes a system for performing periodic analyses to monitor for disparities in loan prices. The settlement imposes a judgment of $2.9 million, all but $200,000 of which is suspended based on the defendants’ inability to pay. The full judgment will be imposed if they are found to have misrepresented their financial condition. The Commission did not seek civil penalties because of the defendants’ financial condition.

More information about consumers’ rights under the ECOA is available at http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm.

The Commission vote to authorize staff to file the complaint and proposed stipulated final order was 4-0. The documents were filed in the U.S. District Court for the Eastern District of Pennsylvania.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Mortgage Lender Agrees to Settle FTC Charges That It Charged African-Americans and Hispanics Higher Prices for Loans

More information about consumers’ rights under the ECOA is available at http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea08.shtm.

The Commission vote to authorize staff to file the complaint and proposed stipulated final order was 4-0. The documents were filed in the U.S. District Court for the Eastern District of Pennsylvania.

FTC Approves Federal Register Notice Announcing Increase in the Ceiling on Allowable Charges Required By Section 612(f) of the Fair Credit Reporting Act

The Federal Trade Commission has approved the publication of a Federal Register notice announcing that the ceiling on allowable charges under Section 612(f) of the Fair Credit Reporting Act (FCRA) will increase from $10.50 to $11.00, effective January 1, 2009. Under 1996 amendments to the FCRA, the FTC is required to revise the ceiling each year, based on the Consumer Price Index, rounded to the nearest fifty cents.

During this time of economic distress, the FTC reminds consumers that this charge does not apply to consumers’ requests for free annual disclosures under Section 211(a)(2) of the Fair and Accurate Credit Transactions Act of 2003. The charge applies when a consumer who has received a free annual disclosure does not otherwise qualify for an additional free disclosure.

Under federal law, consumers are entitled to a free copy of their credit report from each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion —once every 12 months. For details, see “Your Access to Free Credit Reports” at ftc.gov/credit. Consumers also are entitled to a free report if a company takes adverse action against them (such as denying an application for credit, insurance, or employment) and consumers request their report within 60 days of receiving notice of the action. In addition, consumers are entitled to one free report a year if they are unemployed and plan to look for a job within 60 days; they are on welfare; or their report is inaccurate because of fraud, including identity theft.

The Commission vote to publish the notice in the Federal Register was 4-0. (File No. P075400; staff contact is Keith B. Anderson, Bureau of Economics, 202-326-3428.)

(FCRA Ceiling)
(FTC File No. P075400)

ESL Partners and ZAM Holdings Agree to Pay $800,000 in Civil Penalties for Premerger Filing Violations

The Federal Trade Commission today announced the filing of a complaint in federal district court charging two investment funds, ESL Partners, L.P. and ZAM Holdings, L.P., with violating federal law by failing to make timely filings with the government prior to acquiring blocks of AutoZone, Inc. shares in September and October of 2004. To settle the Commission’s charges, ESL Partners and ZAM will pay civil penalties of $525,000 and $275,000, respectively. The action was filed in Washington, D.C. by FTC attorneys acting as deputized agents of the U.S. Department of Justice.

According to the complaint, on September 28, September 30, October 12, and October 14, 2004, ESL Partners made purchases of AutoZone voting securities, adding to its earlier purchases of AutoZone stock. Based on these holdings, ESL Partners met the financial thresholds of the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act), and was therefore required to file premerger notification forms with the government and wait before completing the AutoZone share purchases. The complaint also states that ESL Partners failed to file the required notification forms until January 27, 2005, after being notified by the FTC that such a filing was necessary. Thus, ESL was in violation of the Act from September 28, 2004, through the expiration of the HSR Act waiting period on February 28, 2005.

Separately, the complaint also states that on October 12 and October 14, 2004, ESL Investors, an investment fund owned by ZAM Holdings, also bought blocks of AutoZone voting securities. While it was required to file premerger notification forms and observe the 30-day HSR Act waiting period, it failed to make the filings with the government. In January 2005, the FTC contacted the managing partner and inquired why no HSR filings had been made. ZAM Holdings subsequently made the required filings on January 31, 2005, to cover the 2004 purchases. Accordingly, ZAM Holdings was in violation of the HSR Act from October 12, 2004, through the expiration of the premerger waiting period on March 2, 2005.

“The Commission takes the premerger notification requirements of the HSR Act very seriously and will not hesitate to take action when companies or individuals shirk their filing responsibilities,” said Acting FTC Bureau of Competition Director David P. Wales. “Thirty years after becoming law, the HSR Act and its filing requirements should be well known to companies and individuals making acquisitions and the significant civil penalties imposed here should reinforce the need to fully comply with the Act.”

Under the terms of the proposed final judgment settling the charges, the defendants will pay civil penalties to the U.S. Treasury totaling $800,000. The companies are required to pay the respective penalties within 30 days of the date the final judgment is entered by the court.

The Commission vote to refer the complaint to the U.S. Department of Justice for filing on the FTC’s behalf was 4-0. The complaint and proposed final judgment were filed today in the U.S. District Court for the District of Columbia.

Copies of the government’s complaint for civil penalties, stipulation, and proposed final judgment are available now on the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 051-0091; Civ. No. 1:08-cv-02175)
(ESL Partners.final.wpd)

ESL Partners and ZAM Holdings Agree to Pay $800,000 in Civil Penalties for Premerger Filing Violations

(FTC File No. 051-0091; Civ. No. 1:08-cv-02175)
(ESL Partners.final.wpd)

Getting Rid of Your Old Computer?

Computers are a popular gift during the holiday season. People with a new computer often wonder about the best way to get rid of the old one. OnGuardOnline.gov, the computer safety Web site managed by the Federal Trade Commission, has some tips to make this task easier – and more secure.

Passwords, health information, and other sensitive personal data should be saved elsewhere and erased off the old computer. This protects consumers’ privacy and safeguards them from identity theft. People who use their computers for work should check with their employers regarding the legal requirements businesses must comply with to secure and dispose of data.

To learn more, including how to save and erase data, see “Computer Disposal” at http://www.onguardonline.gov/topics/computer-disposal.aspx.

(FYI computer disposal)

Commission Appoints Interim Monitor, Approves Interim Monitor Agreement in Matter of Reed Elsevier NV/ChoicePoint, Inc.

The Commission has appointed Mitchell S. Pettit as the interim monitor under the terms of the recently approved consent order concerning ChoicePoint, Inc.’s acquisition by Reed Elsevier, NV. The Commission also approved the interim monitor agreement in this matter. The Commission’s decision and consent order authorizes the FTC to appoint an interim monitor to oversee the divestiture of assets required in this matter. As the monitor appointed by the Commission, Pettit, the founder and CEO of MSP Strategic Communication, Inc., will perform his duties in accordance with the interim monitor agreement, which both ChoicePoint and Reed Elsevier have agreed to.

The vote to appoint the interim monitor and approve the interim monitor agreement was 4-0. A public version of the agreement can be found on the FTC’s Web site and as a link to this press release. (FTC File No. 081-0133; the staff contact is Anne R. Schenof, Bureau of Competition, 202-326-2031; see press release dated September 16, 2008, at http://www.ftc.gov/opa/2008/09/choicepoint.shtm).

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 60.2008.wpd)

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