States Accuse Drugmakers of Price-Fixing on Generics

HARTFORD, Conn. (CN) – Connecticut and 43 other states filed a 500-page lawsuit accusing Teva Pharmaceuticals and more than a dozen of the nation’s largest generic drug manufacturers of a broad conspiracy to artificially inflate and manipulate prices, reduce competition and unreasonably restrain trade for more than 100 different generic drugs. 

This July 6, 2017 file photo shows prescription drugs in a glass flask at the state crime lab in Taylorsville, Utah. (AP Photo/Rick Bowmer, File)

The partially redacted complaint filed Friday in Connecticut federal court alleges that “Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the United States.”

“At the zenith of this collusive activity involving Teva, during a 19-month period beginning in July 2013 and continuing through January 2015, Teva significantly raised prices on approximately 112 different generic drugs,” the complaint states.” Of those 112 different drugs, Teva colluded with its “High Quality” competitors on at least 86 of them (the others were largely in markets where Teva was exclusive). The size of the price increases varied, but a number of them were well over 1,000%.” (Parentheses in original.)

The lawsuit focuses on Teva, but says the alleged conduct is “pervasive and industrywide.” 

The pharmaceutical giant did not respond to calls for comment, but has denied the allegations. 

“Teva continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability,” the company said in a statement.

The complaint alleges that Teva, Sandoz, Mylan, Pfizer and other generic drug manufacturers engaged in a broad, coordinated and systematic campaign to conspire with each other to fix prices, allocate markets and rig bids for more than 100 different generic drugs. 

The drugs span all types –tablets, capsules, suspensions, creams, gels and ointments – and classes, including statins, ace inhibitors, beta blockers, antibiotics, anti-depressants, contraceptives, and non-steroidal anti-inflammatory drugs. They treat a range of diseases and conditions from basic infections to diabetes, cancer, epilepsy, multiple sclerosis, HIV, ADHD, and more.

At a Monday press conference, Connecticut Attorney General William Tong said the issue “affects all of us everyday.

“We’re not talking about boutique marginal drugs, we’re talking about drugs that everyone of us takes,’ he said.  

Tong, who suffers from the skin condition rosacea, said he takes doxycycline, which is one of the 114 drugs named in the lawsuit, on a daily basis. 

Over a one or two year period, Tong said that the price of the “common dermatological drug” shot up 8,000%.

“This is common, everyday stuff,” Tong said. 

Describing the conspiracy alleged in the lawsuit, the attorney general said the generic drug manufacturers “represent the largest corporate cartel in American history.”

“I think what we’re seeing is one of the [farthest] reaching conspiracies to collude on price and divide up market share – they call it market allocation – that many of us have ever seen,” Tong said Monday.  

New York Attorney General Letitia James, one of the 44 attorneys general behind the lawsuit, said in a statement that the “evidence shows a multi-year, multi-faceted conspiracy to enrich pharmaceutical companies at the expense of consumers.”

“The scope of the conspiracy is breathtaking, affecting generic drugs that people rely on every day to treat acute and chronic conditions, like diabetes and arthritis,” James said. “The blatant anticompetitive conduct alleged in the complaint harmed consumers’ health and well-being in multiple way and we intend to hold the wrongdoers accountable.” 

Friday’s complaint is the second lawsuit Connecticut has filed against generic drug manufacturers. 

The first complaint, still pending in U.S. District Court in the Eastern District of Pennsylvania, was filed in 2016 and now includes 18 corporate defendants, two individual defendants, and 15 generic drugs.

Two former executives from Heritage Pharmaceuticals, Jeffrey Glazer and Jason Malek, have entered into settlement agreements and are cooperating with the attorneys general in that case.

Joe Nielsen, the first Connecticut prosecutor assigned to the case, issued three subpoenas in July 2014 after reading a New York Times article about a sharp rise in the price of a decades-old generic heart medication called digoxin.  

It eventually turned into 300 subpoenas, and generated more than 11 million phone records and 7 million paper documents. 

Nielsen, who has been working on the case with Assistant Attorney General Michael Cole, then bought software that allowed him to see the patterns of phone calls and the frequency at which they happened around price increases in the market.  

Tong said his office definitely punches above its weight, adding that Friday’s filing could lead to more cases.

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