HARTFORD, Conn. — Twenty states have accused six generic drug manufacturers of price fixing. The states’ attorneys general also said their lawsuit, filed in federal court here, may be just the start of a much broader legal action.
The suit charges that the drug makers, led by New Jersey-based Heritage Pharmaceuticals, conspired to artificially elevate prices on an antibiotic and a diabetes medication. The other companies named in the suit are Aurobindo Pharma USA Inc., Citron Pharma LLC, Mayne Pharma (USA) Inc., Mylan Pharmaceuticals Inc. and Teva Pharmaceuticals USA Inc.
The lawsuit came a day after the U.S. Justice Department filed criminal conspiracy charges against Jeffrey Glazer, Heritage’s former chief executive officer, and Jason Malek, the company’s former president. Heritage fired the two men in August after an internal investigation, the company said.
“We are fully cooperating with all aspects of the Department of Justice’s continuing investigation,” the company said in a statement. “Recently Heritage initiated its own legal action against these same individuals to seek redress for an elaborate embezzlement and self-dealing scheme. We are deeply disappointed by the misconduct and are committed to ensuring it does not happen again.”
Mylan said, in an emailed statement, “To date, we know of no evidence that Mylan participated in price fixing.”
A Teva spokeswoman said, “To date, we have not found any evidence of price fixing within Teva and so, on the facts, we vigorously deny any allegations of wrongdoing.”
Mayne said its board “continues to believe the investigations and the legal proceedings will not have a material impact on its future earnings. However, as previously stated, no assurance can be given as to the timing or outcome of the investigation or legal proceedings.”
“While the principal architect of the conspiracies addressed in this lawsuit was Heritage Pharmaceuticals, we have evidence of widespread participation in illegal conspiracies across the generic drug industry,” stated Connecticut attorney general George Jepsen. “We intend to pursue this and other enforcement actions aggressively, and look forward to working with our colleagues across the country to restore competition and integrity to this important market.”
“We believe that this is just the tip of the iceberg,” Jepsen told The New York Times. “I stress that our investigation is continuing, and it goes way beyond the two drugs in this lawsuit, and it involves many more companies than are in this lawsuit.”
Connecticut in July 2014 initiated an investigation into “suspicious” price increases of certain generic drugs. The state said the probe uncovered evidence of a well-coordinated and long-running conspiracy to fix prices and allocate markets for doxycycline hyclate delayed release, the antibiotic; and glyburide, the diabetes drug. The two drugs saw enormous price increases during the time of the alleged conspiracy, the legal complaint says.
The complaint alleges that the wrongdoing was conceived and carried out by senior drug company executives and subordinate marketing and sales executives. It says Heritage and other drug company executives met at industry conferences and company-sponsored dinners where they would share information about pricing. It alleges that, to avoid having to lower prices, the companies would divvy up customers — such as drug wholesalers, for example — rather than compete for the business.
It further alleges that the defendants routinely coordinated their schemes through direct interaction with their competitors at industry trade shows, customer conferences and other events, as well as through direct email, phone and text message communications. Anticompetitive conduct — including efforts to fix and maintain prices, allocate markets and otherwise thwart competition — caused significant, harmful and continuing effects in the country’s health care system, the states allege.
They further charge that the drug companies knew their conduct was illegal and made efforts to avoid communicating with each other in writing or, in some instances, to delete written communications after becoming aware of the probe. The states allege that the companies violated the federal Sherman Act and are asking the court to enjoin them from engaging in illegal, anticompetitive behavior and for equitable relief, including substantial financial relief, to address violations of law and restore competition.
Citron, which agreed in November to sell certain generics to Aceto Corp., said prior to the deal that some of its employees received grand jury subpoenas from the DOJ relating to the marketing, pricing and sale of four products, one of which Citron never sold and three of which (including glyburide) accounted in the aggregate for less than 1% of its net sales for the six months ended June 30, 2016. Citron discontinued marketing glyburide in early 2015 due to lack of sales. Citron advised Aceto that it never marketed doxycycline hyclate delayed release.
Joining Connecticut in the legal action are Delaware, Florida, Hawaii, Idaho, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nevada, New York, North Dakota, Ohio, Pennsylvania, Virginia and Washington.
A separate congressional investigation into generic drug prices found that the price of doxycycline rose more than 8,000% from October 2013 to April 2014. The Centers for Disease Control and Prevention, as well as several industry trackers, noted shortages of various types of doxycycline in 2013.
“My office has dedicated significant resources to this investigation for more than two years and has developed compelling evidence of collusion and anticompetitive conduct across many companies that manufacture and market generic drugs in the United States,” said Jepsen. “Ultimately, it was consumers — and, indeed, our health care system as a whole — who paid for these actions through artificially high prices for generic drugs.”