Commentary

Generic Drug Price-Fixing Charges Called 'Tip Of Iceberg'

Attorneys general from 20 states yesterday filed suit against six generic pharmaceutical companies — Heritage Pharmaceuticals, Mylan Pharmaceuticals, Teva Pharmaceuticals USA, Aurobindo Pharma, Citron Pharma and Mayne Pharma — for colluding with each other and conspiring to manipulate prices of two drugs: delayed-release Doxycycline, an antibiotic, and Glyburide, a diabetes medication. 

The investigation is continuing and indications are that more companies will be charged for fixing prices on more drugs.

“The alleged anticompetitive scheme was directed by the top-level executives and has harmed U.S. consumers by forcing them to pay higher prices for medications that theoretically should sell at lower costs under free market conditions, the states charged in the civil antitrust lawsuit filed in Connecticut federal court,” writes Kevin McCoy for USA Today.

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“This is just the beginning of our work,” Connecticut AG George Jepsen tells the Wall Street Journal’s Erica Orden. “We think we have under investigation — and I assume [the U.S. Dept of] Justice does as well — many more drugs than in this lawsuit and considerably more generic drug manufacturers than are parties to this suit.” He added: “We think that this is kind of the tip of the iceberg.” 

“The complaint on Thursday describes a cozy industry culture defined by regular dinners and social outings, and argues that those events often cross the line to violate antitrust rules. Generic drug makers hoping to begin selling a new drug first seek out rivals, the suit says, in hopes of reaching an agreement on how to maintain market share and avoid competing on price,” reports Katie Thomas for the New York Times.

“These agreements had the effect of artificially maintaining high prices for a large number of generic drugs and creating an appearance of competition when in fact none existed,” the lawsuit says.

On Wednesday, the Justice Dept. filed separte two-count felony charges of price fixing for the same drugs against two fired executives of Eatontown, N.J.-based Heritage Pharmaceuticals. 

“Conspiring to fix prices on widely used generic medications skews the market, flouts common decency and very clearly breaks the law,” said special agent in charge Michael Harpster of the FBI’s Philadelphia Division in a statement cited by Eric Sagonowsky in Fierce Pharma.

The feds allege that former CEO Jeffrey Glazer and former president Jason Malek “were involved in meetings, conversations or communications with unspecified co-conspirators to discuss the sale” of the two generics, reports Carolyn Y. Johnson in the Washington Post. “According to court documents filed in federal district court in Pennsylvania, Malek and Glazer …  agreed not to compete with those co-conspirators and sold both drugs at 'collusive and noncompetitive prices.'"

Heritage Pharmaceuticals claims that the two men “‘looted’ tens of millions of dollars from the company” and is suing them, the NYT’s Thomas reports. 

Several of the companies have denied the charges in the AGs suit; others have not responded to requests for comment. Heritage, which is not named in the Justice Dept. action and is a subsidiary of India-based Emcure Pharmaceuticals, said that it is cooperating with the investigation. So, too, are the sacked executives, sources tell Livement.

Glazer and Malek “are preparing to plead guilty to price-fixing charges and will cooperate with U.S. prosecutors examining allegations of widespread collusion among drug manufacturers, according to people with knowledge of the matter,” write Tom Schoenberg, David McLaughlin and Sophia Pearson.

“The Justice Department probe marks a broadening of Washington’s scrutiny from branded drugs, which are more expensive, to generic products, which account for more than 80% of U.S. prescriptions,” they point out.

The lawsuit, which was brought by attorneys general from both major political parties, “alleges that industry officials conspired at trade shows, golf outings, private dinners and by text message and cell phone calls. Female sales representatives traded pricing information at what they euphemistically called ‘girls night out’ or ‘Women in Industry’ dinners, writes Mark Pazniokas for the Connecticut Mirror.

“Jepsen’s office says it began investigating after prices of generics skyrocketed throughout 2013 and into 2014. Prices of more than 1,200 medications increased an average of 448% from July 2013 to July 2014, when the investigation began, according to the lawsuit.”

About 25 years ago, an executive of a major pharmaceutical firm suggested that I write a white paper about how the high price of pharmaceuticals was driven by the generic drug companies. I turned down the assignment, believing he was commissioning what we’d now call faux news. Apparently not.

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