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$453M settlements in diabetes drug price-fixing case get tentative OK from judge

The three settlements were filed less than three weeks before a jury was set to decide whether drug companies colluded to raise the cost of a crucial diabetes medication.

SAN FRANCISCO (CN) — A federal judge on Wednesday tentatively approved more than $450 million in settlements with three pharmaceutical giants accused of conspiring to jack up the price of an essential diabetes drug.

In a consolidated class action, drug wholesalers claim Bausch Health Companies, Lupin Pharmaceuticals, Assertio Therapeutics and their affiliated companies struck anticompetitive deals that caused the price of brand-name diabetes drug Glumetza to spike nearly 800% from $5.72 to more than $51 per tablet in 2015.

A jury trial was set to start in early October, but before that could happen motions for settlements with all three pharma giants were filed over the last eight days.

Bausch will pay $300 million. Lupin will pay $150 million, and Assertio will pay $3.85 million. The Assertio settlement is significantly smaller due to the firm’s tenuous financial condition and pending opioid litigation that could push the company into bankruptcy.

On Wednesday, Senior U.S. District Judge William Alsup said he will tentatively approve the deals after lawyers address his concerns regarding class notice and timing.

“I’m going to give preliminary approval to all three settlements subject to getting an acceptable form of notice and timetable,” Alsup said during a telephonic hearing Wednesday. Shortly after the hearing, he issued an order granting preliminary approval of the deals.

According to the consolidated lawsuit, Assertio Therapeutics, formerly known as Depomed Inc., conspired with Lupin to delay lower-cost generic versions of Glumetza from entering the market. As part of a 2012 patent suit settlement, Lupin agreed to delay introducing its generic version of Glumetza until February 2016. In exchange, Assertio and Santarus, which had exclusive rights to make and sell Glumetza in the U.S. at that time, agreed to postpone launching their own generic until six months after Lupin entered the market. This gave Lupin a guaranteed six-month period to exclusively sell its generic version.

The drug wholesalers say that deal was worth at least $56 million to Lupin, but it actually became much more valuable in 2016 when the price of Glumetza increased nearly nine times over, allowing Lupin to charge $44 per tablet instead of the $4 it would have otherwise charged.

The wholesalers, referred to as “direct purchasers” in the litigation, say this “pay-for-delay deal” amounted to $280 million in value for Lupin and billions of dollars in extra sales for Bausch, which inherited exclusive rights to make and sell Glumetza through a web of corporate acquisitions and name changes. The plaintiffs say this scheme also caused them to pay $2.8 billion in overcharges since 2012.

During a hearing on cross-motions for summary judgment this past April, Alsup predicted the drug companies would have a hard time convincing a jury that the nearly 800% spike in Glumetza’s price in 2015 was justified based on market conditions.

“I don’t think you’ll ever be able to explain to a jury $51 a pill when it was $5 before,” Alsup said at that hearing.

The judge denied the motions for summary judgment in May, setting the stage for a jury trial that was scheduled to start Oct. 4. Alsup vacated that trial date Wednesday.

Also on Wednesday, Alsup questioned why Assertio’s $3.85 million settlement is “dramatically lower” than two other deals with Bausch and Lupin that amount to $450 million combined.

Class counsel Steve Shadowen of Hilliard Shadowen explained that Assertio’s financial condition is in dire straits. The company had negative $24.8 million in working capital as of July, and its $23 million in accounts receivable, or expected income from prior sales, was offset by $22.5 million in liability for rebates and discounts, Shadowen said. The company is also a defendant in some 250 pending opioid cases which could push it into bankruptcy, he added.

Shadowen said $3.85 million is “at the high end” of what Assertio can pay.

“We were bitterly disappointed especially given Assertio’s role in creating the agreement that allowed Bausch and Lupin to take from consumers the amount of money that they took,” Shadowen said. “That’s a bitter pill to swallow to let Assertio go with this amount of money, but we have to look at the hard cold financial reality.”

Class attorneys will ask for fees amounting to 25% of the total settlements, or $114.7 million, which will be deducted from the combined settlement fund. Alsup asked lawyers to revise a proposed settlement notice that will go out to 81 class members and to ensure class members can opt out of the deal after motions for attorneys’ fees are filed.

The judge proposed a tentative schedule in which motions for attorneys’ fees will be filed Dec. 1, settlement objections will be due by Dec. 22, and a hearing on final settlement approval will be held Jan. 20.

He also ordered lawyers to disclose dollar figures for a separate set of settlements that plaintiff Humana is negotiating with Bausch, Lupin and Assertio in a state court action.

“It would concern me if those dollar amounts are out of line with what class members are getting,” Alsup said of the potential Humana settlements.

After the hearing, lead class counsel Lauren Barnes of Hagens Berman Sobol Shapiro characterized Alsup’s tentative approval as a win for drug wholesalers that allegedly overpaid for Glumetza and its generic alternatives from May 2012 to August 2020.

“We believe in the strength of our allegations that the defendants unlawfully suppressed generic competition for several years for an essential diabetes drug. And we believe these settlements are a great result for the class,” Barnes said. “We are incredibly pleased with Judge Alsup’s preliminary approval and look forward to seeing these settlements fully approved, bringing meaningful recovery to the class members.”

Bausch, Lupin and Assertio did not immediately respond to emails requesting comment Wednesday morning.

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