NEW YORK (CN) - The lab that sold the rights to a medication for HIV and cancer patients to reviled former Turing Pharmaceuticals CEO Martin Shkreli asked a federal judge Monday to stop Turing from selling the drug under its name.
California pharmaceutical company Impax Laboratories claims Turing broke all three provisions of the purchase agreement that allowed it to sell Daraprim, the drug that made Shkreli a household name after he raised its price more than 4,000 percent last year.
The price hike on the drug — which is used to treat toxoplasmosis, a life-threatening disease for people with HIV, AIDS and cancer — caused widespread public outrage, a congressional investigation and a smirk-filled appearance by Shkreli before Congress in February.
Impax sold Turing the rights to Daraprim last August, along with a large amount of the drug in prepackaged bottles.
Turing used Impax's unique drug identification code, known as a national drug code, or NDC, to sell the drug, leaving Impax to make the required certifications and rebate payments to the government, according to a lawsuit filed Monday in Southern New York Federal Court.
As a condition of being allowed to sell Daraprim, Turing allegedly agreed to report monthly pricing data to Impax and reimburse Impax for the its Medicaid rebate liability arising from the drug's sales.
In addition, Turing agreed to act in a way that does not endanger or negatively affect "the value of the goodwill pertaining to Impax's trademarks," Impax claims in its 26-page lawsuit.
Now, just eight months into the agreement, Turing has shirked all of these responsibilities, Impax claims.
"As a result of these breaches of the purchase agreement, Impax has suffered serious financial, legal and reputational harm, including over $20 million in rebate liability that is owed and past due to Impax by Turing, plus additional rebate liability that continues to accrue by virtue of Turing's sales activities for Daraprim inventory under Impax's NDCs," the complaint states.
Turing was late turning its pricing data over to Impax three quarters in a row, and recently told Impax it might have sent "incorrect" data for the third quarter of 2015 "without providing plausible explanations for why this may be," according to the complaint.
As a result, Impax claims it had to make educated guesses in its reports to the Centers for Medicare & Medicaid Services (CMS), the agency that administers the Medicaid Drug Rebate Program for the federal government. Certifying false data could leave Impax vulnerable to civil liability, regulatory action or even criminal prosecution, the lawsuit states.
"Turing's unwillingness to provide and certify these basic data, consistent with the purchase agreement, has forced Impax to file data with CMS based on its best knowledge and without the certainty that compliance with the purchase agreement was designed to provide," Impax alleges.
In addition, Turing's massive price increase for Daraprim meant Impax had to pay more than 50 times the Medicaid rebate it had expected when it sold the rights to the drug. Despite multiple invoices, Turing has not fully reimbursed Impax for this cost, the company claims.
"At present, Turing owes and is past due on approximately $20 million in rebate liability that Impax has invoiced to it for [quarter three] 2015 and [quarter four] 2015," the lawsuit states. "Further, Impax has invoiced Turing for an additional approximately $10 million which will be due and owing on May 19, 2016. Impax has paid over $5 million in rebate liability to CMS on behalf of Truing, and in May 2016, Impax will make additional payments of approximately $25 million to state Medicaid agencies, also on behalf of Turing."
The price increase and Turing's unwillingness to report accurate data has also damaged Impax's reputation, in violation of the third condition of the purchase agreement, the company claims in the 26-page complaint.
"Turing has breached these obligations, hindering Impax's ability to comply with federal law and risking harm to Impax's relationship with CMS and the federal government, as well as other reputational harm," according to the lawsuit.
Impax seeks judgment allowing it to prevent Turing from selling the drug using its NDC, specific performance to make Turing comply with the purchase agreement on past due reports, and more than $20 million in damages for the accrued Medicaid liabilities.
"Obviously we need to protect ourselves under the contract and hence there's a lawsuit," said Mark Donohue, vice president of investor relations and corporate communications for Impax.
Shkreli resigned as Turing's CEO after the FBI arrested him on charges of securities fraud in December.
Turing did not respond to an emailed request for comment Tuesday.
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