At Least 16 Generic Drug Companies and 300 Drugs Target of Price-Fixing Investigation

blue pills spilled onto stack of cash

It apparently began with a 2016 federal lawsuit. At that time, 20 state attorneys general filed a federal lawsuit alleging that six generic drug makers artificially inflated and manipulated prices for an antibiotic and an oral diabetes drug. The goal was to reduce competition. 

Now, according to The Washington Post, it has spread out to include price-fixing by at least 16 companies and 300 drugs. Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut, who is leading the investigation, told The Post, “This is most likely the largest cartel in the history of the United States.”

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The investigation to date details company executives who meet regularly for dinners, cocktails and golf, and who have developed their own jargon to describe the business. For example, the “sandbox” described the market for generic drugs, “fair share” was used to divide up the market so every company could continue to profit, and “trashing the market” meant a competitor was ignoring the unwritten rules.

A federal judge ruled last month that more than one million emails, cellphone texts and other documents that had been cited as evidence could be shared by all plaintiffs.

One example of the price-fixing included a much older drug, albuterol, sold by Mylan and Sun Pharmaceutical. Used to treat asthma symptoms, the price of the drug exploded more than 3,400 percent, from 13 cents a tablet to more than $4.70. This particular example is described in a lawsuit filed by grocery chains including Kroger against the generic drug industry.

Generic drug sales in 2017 were about $104 billion. Specific details of alleged overcharges have not been released, although investigators indicate that with a market that big, even a small percentage of price manipulation could lead to billions of dollars of overcharges.

In general, generic drug companies reject the allegations and argue that the legal system lacks evidence of a conspiracy. The 16 companies accused include Mylan, Teva Pharmaceutical and Dr. Reddy's LaboratoriesIn an email to The Washington Post, Mylan denied wrongdoing. In a court filing, Teva Pharma indicated the price-fixing conspiracy allegations “are entirely conclusory and devoid of any facts.”

Much of the investigation so far is under seal and not available to the public. Investigators indicate it shows the entire industry is rife with price-fixing schemes, and the plaintiffs include 47 states.

In a parallel criminal case, two former executives of Heritage Pharmaceuticals have pleaded guilty and are cooperating with the Justice Department.

According to legal officials, price increases of up to 2,000 percent have been documented as part of the investigation. In 2013 and 2014, pharmacists, and state and federal lawmakers grew concerned. J.D. Fain, owner of Pieratt’s Pharmacy in Giddings, Texas, told The Washington Post, “There’s old, old drugs that have been around a long time, and all of a sudden their price has increased by hundreds of percent and we don’t know why.”

According to the Times of Israel, Teva stock dropped by more than four percent after the news broke. Although The Washington Post doesn’t mention any specific Teva Pharma drugs, The Times of Israel cites a generic version of the drug Syprine to treat rare illness Wilson’s disease that costs $18,275 for 100 pills compared to the branded version’s cost of $21,267 for 100 pills.

Apparently, the states’ lawsuit does place an emphasis on Mylan and its president, Rajiv Malik, who is personally cited as a defendant. Mylan came under fire in 2016 for raising the cost of its EpiPen, to treat allergic reactions, by about 500 percent. In the lawsuit, Malik reportedly took a phone call from an executive of Heritage, Jeff Glazer, while traveling in the UK in 2013. Allegedly, Mylan agreed not to sell Doxy DR to CVS and McKesson and Heritage agreed not to set a low price on the drug.

At this point, Mylan said in a statement, “We have been investigating these allegations thoroughly and have found no evidence of price fixing on the part of Mylan or its employees. Mylan has deep faith in the integrity of its president, Rajiv Malik, and stands behind him fully.”

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