20 States accuse Mylan, Teva, others of price fixing; what a banner week for the legal profession

Peggy_Marco / PixabayOne day after federal prosecutors unsealed a criminal indictment against the former CEO of Heritage Pharmaceuticals Inc. (Eatontown NJ), 20 state attorneys general filed an antitrust lawsuit against six generic drugmakers.

20 state attorneys general filed an #antitrust #lawsuit against six generic drugmakers Click To Tweet

The complaint, filed last week in federal court in Connecticut, makes clear which companies could be implicated in the antitrust investigation federal prosecutors are pursuing.

As Forbes reported on Wednesday, those companies are Mylan NV (Amsterdam), Teva Pharmaceutical Industries Ltd. (Petach Tikva ISR), Citron Phrama LLC (East Brunswick NJ), Heritage Pharmaceuticals and Aurobindo Pharmaceuticals Ltd. (Hyderabad IND). In addition, the state attorneys general sued Mayne Pharma Group Ltd. of Australia.

Jeffrey Glazer, the former CEO of Heritage Pharmaceuticals, is expected to plead guilty in January to helping orchestrate a scheme to manipulate the prices of two drugs, doxycycline hyclate delayed release used to treat severe acne, and glyburide, an oral diabetes medication.

It became clear last Tuesday Glazer is cooperating with federal prosecutors and the allegations state attorneys general announced on Thursday mirror the criminal allegations, but also name the companies involved and detail some of the conversations Glazer and Jason Malek, the former president of Heritage, had with other executives from companies like Mylan and Teva.

The antitrust lawsuit and federal investigation will likely bring further political heat to the generic drug sector. The new lawsuit goes out of its way to describe:

“that price dynamics have changed for a large number of generic drugs,” and that “prices for generic drugs have uncharacteristically risen–some have skyrocketed–for no apparent reason, sparking outrage from public officials, payers and consumers across the country whose costs have doubled, tripled, or in some case increased up to 1,000% or more.”

“Beginning as early as 2013, defendants Heritage, Mylan, and Mayne knowingly agreed to allocate and divide the market for the generic drug Doxy DR,” the U.S. Department of Justice said in a filing on Thursday. “Heritage, Mylan, and Mayne knowingly agreed to allocate and divide the market,” the DOJ said.

The states’lawsuit is being led by George Jepsen, the attorney general of Connecticut. The suit is one piece of a broader generic drug pricing probe under way in the United States, notes Fortune. It has grown over the past two years to include multiple drugs and companies, some of which have said they are being investigated by the DOJ.

According to the 56-page complaint, Glazer and Heritage were the ringleaders for the price-fixing scheme involving doxycycline hyclate and glyburide. Glazer and Malek allegedly had phone calls and email communication with Mylan executives where they agreed to allocate market share and refrain from competing for customers of doxycycline in a price war.

Mylan agreed to walk away from at least one large national wholesaler and one large pharmacy chain to let Heritage increase its market share, the complaint says. Malek also had a direct relationship with an unnamed Teva employee and the two agreed to raise prices on glyburide, the complaint claims.

In a statement Mylan said, “To date, we know of no evidence that Mylan participated in price fixing.”

Teva said in a statement, “We have not found evidence that would give rise to any civil or criminal liability.”

Shares in Mayne took the biggest hit due to the news, skidding 15% to $1.30(AUD) in Sydney, while Aurobindo slipped 5% to 690.65 Indian rupees in Mumbai. Mylan rose 4% to $37.82, and Teva added 21 cents to $36.51 in New York.

Steve’s Take:

Talk about a really wide net, geographically speaking. Generic drugmakers from Australia to Israel, from Amsterdam to India and then back across to America received yet another holiday surprise.

Just a day after federal authorities released the initial salvo into an alleged price-fixing scheme by charging two former Heritage Pharmaceuticals execs, 20 states unveiled a civil lawsuit accusing half a dozen drugmakers, including Mylan, Teva and Heritage with essentially the same actions.

The states’ lawsuit (pdf), which also includes Aurobindo Pharma, Citron and Mayne Pharma, said it is based on an investigation by the Connecticut Attorney General’s office launched in 2014, according to FiercePharma.

The suit says investigators uncovered multiple examples of price fixing and collusion which they will eventually tackle but this suit focuses on two drugs, the delayed-release version of antibiotic doxycycline hyclate, and diabetes drug glyburide, which also are the two drugs that the Heritage execs are accused of exploiting.

The suit says that instead of the traditional stair-stepping down in prices as more generics entered the market,

“Prices for dozens of generic drugs have uncharacteristically risen–some have skyrocketed–for no apparent reason…”

Not all of the lawsuit filings are public and so the prices the drugmakers are said to have charged are not provided.

Reuters points out that Minnesota Sen. Amy Klobuchar, who has been pushing for action, has said that the price of doxycycline, rose between October 2013 and May 2014 from $20 for 500 tablets to $1,849.

In comments to Reuters, Mylan denied the charge, Teva said the company had found no evidence that would “give rise to any civil or criminal liability,” while Heritage, part of India’s Emcure Pharmaceuticals, referred to an earlier statement that put the blame for any price fixing on its former executives named in the federal charges.

The states’ lawsuit said that the Connecticut probe was set in motion by “outrage from public officials, payers and consumers” who saw generic drug prices soar more than 1,000% in some cases.

It claims that the alleged price fixing was discussed at trades shows and conferences then “refined and coordinated” at “dinners, girls nights out” and through phone calls, emails and text messages.

The states’ probe started in 2014 and indications are that there is plenty more to come, from the feds and from the states. A whole raft of companies, including Teva, Mylan, Sun Pharma and its subsidiary Taro Pharmaceutical Industries, Mayne and Par Pharma have each disclosed subpoenas relating to the federal investigation in the last several years. The lawsuit by the 20 states says that the investigation is ongoing and that price gouging involving other drugs “will be acted upon at the appropriate time.”

Jason Gerberry, a Leerink Partners analyst, told investors in a note Wednesday after the charges involving the former Heritage execs were disclosed that he expects the DOJ will roll out additional cases over the next couple of years.

With all due respect to Mr. Gerberry, considering the pace of the recent complaints and indictments and the fact there still are two weeks left in 2016, don’t be surprised if more pleadings show up before the New Year.

As a JD, this salvo of federal and state-sponsored litigation against well-heeled pharma companies smacks of another fine example of the “Full Employment Act for the Nation’s Lawyers” in action.

Steve's Take: More litigation against well-heeled #pharma = 'Full Employment for #Lawyers Act' Click To Tweet

Well, at least for the private firms with trial lawyers possessing decades of experience, and more importantly, connections with the plethora of federal- and state-government agencies involved in these cases. I can see them doing their “rain dance” right now.

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