Lawsuit Alleges Price Fixing by Generic Drug Manufacturers

A group of several states has leveled accusations against important figures in the generic drug industry. The states allege that these drug manufacturers engaged in a widespread price-fixing conspiracy, and recently expanded a prior lawsuit to include several other drug manufacturers and medicines. The attorneys general of 45 states and the District of Columbia filed the lawsuit, accusing 18 companies and subsidiaries, and naming 15 medicines.

The defendants include Dr Reddys Laboratories (DRL), Glenmark Pharmaceuticals, Sun Pharmaceutical Industries, and Emcure Pharmaceuticals. In addition, the lawsuit focused on two executives, Rajiv Malik, president and executive director of Mylan NV, and Satish Mehta, CEO and managing director of Emcure Pharmaceuticals in India.

According to the states, the drug manufacturers and executives divided customers among themselves for their drugs, and agreed that each company would possess a specific percentage of the market.

The states further allege that the companies sometimes came to an agreement on price increases beforehand. Also, the states said Malik and Mehta communicated directly with each other about their company’s share of the market for a type of common antibiotic, doxycycline hyclate, for which the release was postponed.

The lawsuit mentioned the high recurrence of communication, including 1,501 calls and text messages between executives and salespeople at Teva Pharmaceuticals and its competitors from July 2013 and 2014. The complaint states that executives had many chances at yearly trade conferences to meet. It is alleged that when a company was in need of additional clients to attain its share, a competitor who had more than its “fair share” would identify and “walk away” from a customer by apprising them of a considerable price increase, thereby permitting the other company to come in with a lower bid.

A representative from Mylan revealed in a statement that it had not discovered any proof of price fixing by the company or any of its employees. Malik, an official of the company who ranks second-highest, has received in excess of $50 million in compensation over the course of the last three years, earning more than CEO Heather Bresch.

The investigation led by the states is in addition to a similar investigation being carried out by the Department of Justice (DOJ). In December, the DOJ filed charges against two Heritage Pharmaceutical executives for the part they played in anti-competitive activities. Heritage is the parent company of Emcure.

In January, the two previous executives of Heritage entered a plea of guilty to federal charges of conspiracy to fix prices and divide the market for doxycycline and the diabetes drug glyburide. The two executives, prior Heritage president Jason Malik and previous chairman and chief executive Jeffrey Glazer, arrived at a deal with 41 states and territories in which they promised to pay $25,000 each and be cooperative with the state investigation.

As a result of the rising prices from both branded and generic makers, there has been much indignation in the United States. President Donald Trump accused pharmaceutical companies of “getting away with murder” concerning the drug prices. According to Connecticut Attorney General George Jepsen, who is in charge of the case, the investigation is ongoing, and claims will likely be filed against additional companies and potential executives.

News of the lawsuit has resulted in a loss in shares of companies named in the suit. Shares of Mylan were reduced by 6.6 percent. Lannett sustained a loss of 13.7 percent. Shares of Endo rose by seven percent but were reduced from its 12 percent peak prior to the news about the amended lawsuit.

According to U.S. Senator Amy Klobuchar, a Minnesota Democrat who had been urging that action be taken to combat high drug prices, the price of doxycycline increased from $20 for 500 tablets to $1,849 between October 2013 and May 2014. The amended complaint would name other drugs, including glipzide-metformin and glyburide-metformin, which are two diabetes medications that are most typically used.

The U.S. Justice Department, which is performing a criminal investigation, requested that the Pennsylvania court that is presiding over the lawsuit, place a hold on the discovery process. The department claims that it could interfere with the criminal investigation. However, Connecticut Assistant Attorney General Joseph Nielsen stated the states would, in all likelihood, oppose such a request, which may delay the lawsuit.