In December 2003, Abbott Labs raised the price of its Norvir AIDS drug, which is commonly used in HIV drug cocktails, by 400 percent, creating a firestorm in the AIDS community. The mark-up prompted the Service Employees International Union Health & Welfare Fund to file a class-action lawsuit the next year that alleges the price hike violated antitrust laws.

How so? Abbott sells a combo pill called Kaletra that includes Norvir and its own protease inhibitor. The lawsuit claims Abbott raised Norvir’s price - but not the Kaletra price - in order to boost Kaletra sales at the expense of other protease inhibitors that require Norvir as a booster. In other words, Abbott allegedly tried to use Norvir to create a monopoly over the market for protease inhibitors.

Now, on the eve of a trial, Abbott is agreeing to settle the case for between $10 million to $27.5 million, rather than battle charges that it tried to create a monopoly for Kaletra, a source says. The class-action suit, which cites internal documents, would have been the first to come to trial of seven filed by individuals, rival drugmakers and pharmacies over Abbott’s decision to raise its prices, Bloomberg News notes. Abbott faced up to $1.1 billion in damages.

“If I’m competing with other drug companies who use the same drug and raising the price to drive rivals out of the market, that would make a strong argument for abusive conduct,” Warren Grimes of Southwestern Law School in Los Angeles, tells Bloomberg, prior to the settlement. “And if e-mails suggest they increased the price to thwart competition, (as charged by the plaintiffs), I’d love to bring that claim.”

Losses might eventually make Abbott liable for $1.1 billion in damages, cost tens of millions a year in price rollbacks and lead to a reduced share of the $2.1 billion US market for AIDS meds. “It would have a larger impact than many people expect, larger than the revenue would suggest,” Jan David Wald, a Stanford Group analyst, tells Bloomberg.

Kaletra is Abbott’s third largest-selling drug, generating annual revenue of $1.3 billion, while US sales of Norvir totaled $233 million last year. A court-ordered 80 percent reduction in the US price for Norvir - the stiffest penalty the judge might impose - may cut Abbott’s annual revenue by as much as $186 million and fuel price competition against Kaletra, which logged $538 million in US sales last year.

Abbott requested the case be thrown out on the grounds that its Norvir patents, covering the drug and its use in combination with other medicines, allowed Abbott to set its own prices. But US District Judge Claudia Wilkin ruled the patents aren’t a shield from an antitrust suit. She’ll decide the case without a jury. And she alsoo found Abbott “failed to establish a lack of monopoly power, anticompetitive conduct or antitrust injury,” making a trial necessary.

Abbott has denied any intent to use pricing to maintain a monopoly in court filings and statements. It disputes claims by a patients’ expert that it controls 73 percent of the market, above the 65 percent share needed under antitrust law to show market power. Abbott’s share fell to 47 percent from 77 percent after the price increase, the drugmaker wrote in court papers.

Norvir was “repriced to capture its full value,” after the drug moved from being a standalone medicine with an average dose of 600 milligrams twice a day to a daily 100- to 200-milligram booster in a protease-inhibitor cocktail, an Abbott spokeswoman tells Bloomberg.

Besides the patients, 16 companies including Glaxo and Rite Aid, sued over identical claims. Their cases are combined in the Oakland court, with no trial date set.

Plaintiffs claim company documents prove Abbott raised the price to drive up the cost to competitors of combining Norvir with their protease inhibitors. E-mails show “executives understood the illegal nature of their scheme,” Glaxo wrote in its complaint. Here is the Glaxo lawsuit.

The nationwide overcharge is $370 million, according to Douglas Greer, an economics professor at San Jose State University in California, in a report prepared for the plaintiffs. The pharmacy and drug companies may seek that amount in damages, which can be tripled under antitrust law to $1.1 billion, when their case comes to trial.