Big Pharma: Baxter, CSL Sued Over Accusations of Blood Monopoly

July 16 (Bloomberg) — CSL Ltd. and Baxter International Inc. were sued by a Missouri hospital over allegations they conspired to fix and raise prices for blood plasma products.

The companies used key words to encourage each other to increase supply only incrementally to keep pace with demand and not to increase supply to the extent the companies actually compete for market share, lawyers for Pemiscot Memorial Hospital, based in Hayti, Missouri, said in a complaint filed yesterday. The lawsuit was filed in Philadelphia federal court.

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“As a result of the conspiracy, prices for blood plasma products were higher than they otherwise would have been,” Marc Machiz, an attorney for Pemiscot, said in the complaint. “Beginning in 2005 and continuing through the present, prices for blood plasma proteins have increased substantially.”

Baxter and Melbourne-based CSL are the world’s largest makers of blood plasma products. Last month CSL abandoned a $3.1 billion bid for Talecris Biotherapeutics Holdings Corp. after regulators blocked the plan.

The deal would have helped CSL overtake Deerfield, Illinois-based Baxter as the leader in the $15 billion global market for blood plasma-derived medical treatments such as immunoglobin, used to treat patients with weakened immune systems.

FTC Lawsuit

The U.S. Federal Trade Commission earlier sued to stop CSL’s proposed acquisition over claims the deal would leave the two largest companies with 80 percent of the U.S. market for blood plasma products.

Baxter spokesman Chris Bona said the company wasn’t aware of the lawsuit and declined further comment. Robin Gilliland, an outside spokesman for CSL, said the company hasn’t seen the complaint and has no comment.

Pemiscot’s complaint seeks to represent purchasers of blood plasma proteins in the U.S. from Oct. 1, 2004, to the present. The complaint is also seeking unspecified damages.

The FTC said last month that the plasma protein industry showed “troubling signs of coordinated behavior,” according to Pemiscot’s complaint. The FTC’s complaint describes signals between the two companies suggesting that increasing production of blood plasma products could hurt their ability to reap significant profits, according to Pemiscot’s complaint.

Essential Treatments

Plasma-derivative proteins, which take seven months to a year to manufacture, are essential in treating diseases, including multiple sclerosis and Guillain-Barre syndrome, in which immune cells attack the nervous system. Among the products on the market are CSL’s Privigen and Talecris’s Gamunex.

The annual costs of such treatments can exceed $90,000 per patient in some cases. Hospitals purchase the products through contracts negotiated with group purchasing organizations, the complaint said.

“Consequently, small changes in production levels cause dramatic swings in prices for products, and producers stand to increase profits greatly by controlling output relative to demand,” Machiz said in the complaint.

The number of blood plasma makers declined to five in 2005 from 13 in 1990, according to court documents.

Baxter rose $1.77, or 3.3 percent, to $54.86 at 12:31 p.m. in New York Stock Exchange composite trading. CSL rose 0.5 percent to A$30.11 in Sydney.

The case is Pemiscot Memorial Hospital v. CSL Ltd., 09- 3146, U.S. District Court, Eastern District of Pennsylvania (Philadelphia)

To contact the reporters on this story: Sophia Pearson in Wilmington, Delaware, at spearson3@bloomberg.net.

Last Updated: July 16, 2009 12:33 EDT
By Sophia Pearson

Source: Bloomberg

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