Rauner’s former company settled federal lawsuit over infant heart drug

By DOUG IBENDAHL • October 23, 2014

 

BabyAs we’ve reported, Ovation Pharmaceuticals, Inc., based in Deerfield, Illinois was acquired by Chicago private equity firm GTCR in 2002. Rauner was chairman of GTCR at the time. Rauner and his partners sold Ovation in March of 2009 for $900 million to Denmark-based drug giant H. Lundbeck A/S.

 

Ovation was accused in 2008 by the Federal Trade Commission and the Minnesota Attorney General of price gouging and violating antitrust laws over a life-saving drug used to treat a serious heart condition in premature babies. You already know that the government plaintiffs were unsuccessful in that particular lawsuit brought in federal court.

 

It was undisputed that Ovation had quickly raised the price of the crucial drug by 1,300%. But the federal judge’s ruling was confined to other technical market factors analyzed under the antitrust statute.

 

But what you also need to know is that there was a separate federal lawsuit which also targeted price gouging and antitrust violations by Ovation over the same drug.

 

And this one achieved big success for the plaintiffs and the side of common decency.

 

While the FTC’s lawsuit was still pending in 2009, a group of hospitals filed class action lawsuits against Ovation and Lundbeck for violations of federal antitrust laws and unjust enrichment. The allegations made by the class action plaintiffs closely tracked those brought by the FTC in its lawsuit filed a year earlier.

 

Both company names were cited in the lawsuit because while the complained-of conduct occurred during GTCR’s ownership of Ovation, the class action suit was filed about a month after the sale of Ovation to Lundbeck in 2009.

 

The Minnesota Children’s Hospital was the first to recognize the “rip-off” when the price of Indocin jumped from $26 to $500 per vial, and it reached out to U. S. Senator Amy Klobuchar. And it was Senator Klobuchar who first complained to the FTC. Indocin has been used for decades to treat a blood vessel defect that occurs in some babies born premature.  If left untreated, the defect can lead to congestive heart failure with fatal results.

 

The class action went forward separate from the FTC’s lawsuit and in June of 2011, plaintiffs which included New York’s St. Barnabas Hospital Inc., the Community Medical Center Healthcare System of Scranton, Pennsylvania, and the Connecticut Children’s Medical Center in Hartford, Connecticut, reached a settlement with Ovation/Lundbeck. Details of the settlement agreement have not been disclosed.

 

Whether Rauner and his fellow GTCR partners saw any adjustment to their Ovation sale proceeds as a result of that settlement is also unknown. But my guess is Rauner did what he typically does – he cut and ran with pockets full of cash.

 

Yesterday Greg Hinz, a blogger at Crain’s Chicago Business, picked up on our original breaking story about the FTC lawsuit.

 

I agree with Hinz where he said: “But does [Rauner’s] bottom-line fixation on making money leave enough room to care about those things? It’s a fair question to ask.”

 

But Hinz went on with “there is another side to this.”

 

No Greg, actually there’s not.

 

The Crain’s blogger essentially offers the “oh well, what can you do, most everyone in the drug business operates this way” argument.

 

Yes, and then some people wonder why rising health care costs remain a significant drain on the budgets of families, businesses, and federal and state governments.

 

Even the suggestion that somehow Ovation and other drug companies are doing a public service because they use the spoils derived from those astronomical price increases to reinvest in new drugs is absurd.

 

So let me see if I have this straight. Near billionaires like Bruce Rauner can’t possibly be expected to take even a small haircut on their already sky-high profit margins. Guys like Rauner cringe at the thought of chipping more of their own money into developing new drugs. But of course they do expect all of the profits from any new drug they acquire.

 

Who is supposed to fund the new drugs that will enable guys like Bruce Rauner to exclusively harvest all the cash?

 

Of course that would be the parents desperate to save a newborn baby with a life-threatening heart malady. Parents in that situation are going to sell the car and mortgage the house if that’s what they have to do to pay the 1,300% price increase demanded by Rauner’s company.

 

This is exactly the point U.S. Senator Amy Klobuchar was getting at here back in 2008: “A company like Ovation knows that when it comes to saving a baby’s life, price is no object. They banked on that, literally.”

 

Banked on it. That’s exactly what Rauner and his fellow GTCR partners did.

 

As we’ve said repeatedly here at Republican News Watch, it doesn’t matter how much money Bruce Rauner has made. But it does matter what he was willing to do for it, and it does matter who he expected to subsidize his lifestyle.

 

Rauner and his partners made the decision that it was okay to squeeze parents desperate to save the life of their newborn child.

 

What else is it going to take for those still supporting Bruce Rauner?

 

Doug Ibendahl is a Chicago Attorney and a former General Counsel of the Illinois Republican Party.

 

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