Connecticut leads 20 states alleging price-fixing in generic drugs

Attorney General George Jepsen

Attorney General George Jepsen

Attorney General George Jepsen’s office is leading a multi-state investigation of generic drug companies that culminated Thursday in a federal price-fixing lawsuit filed in Hartford that complements an unfolding criminal antitrust investigation by the U.S. Department of Justice.

The lawsuit follows an extensive investigation involving 20 states and was filed after federal authorities unsealed charging documents in Pennsylvania that allege a price-fixing conspiracy by two former executives of Heritage Pharmaceuticals and unnamed co-conspirators.

Heritage was one of six pharmaceutical companies named as defendants in the Connecticut lawsuit, filed under seal to protect what Jepsen says is a continuing investigation. A redacted version was made public Thursday by Jepsen’s office.

“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,” Jepsen said. “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.”

READ THE LAWSUIT

The lawsuit 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 informing at what they euphemistically called “girls night out” or “Women in Industry” dinners.

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 percent from July 2013 to July 2014, when the investigation began, according to the lawsuit.

“Ultimately, it was consumers – and, indeed, our healthcare system as a whole – who paid for these actions through artificially high prices for generic drugs,” Jepsen said. “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.”

The lawsuit focuses on an antibiotic, doxycycline hyclate delayed release, and glyburide, an oral diabetes medication. But the investigation is broader, Jepsen’s office says.

Doxycycline was one of the drugs cited by U.S. Sen. Bernie Sanders, I-Vt., and U.S. Rep. Elijah E. Cummings, D-Md., as they announced a congressional investigation two months ago into generics. They said the antibiotic, prescribed for Lyme disease, cost $20 for a bottle of 500 tablets in October 2015, then jumped by April to $1,849.

Jepsen’s suit says the companies violated the federal Sherman Act and asks the court to enjoin them from engaging in illegal, anticompetitive behavior. It seeks unspecified damages, including the seizure of illegal profits.

The pharmaceutical companies are accused of fixing prices by manipulating markets – companies would agree not to compete on certain drugs – or simply agreeing on how high to raise prices.

Joining Connecticut in the lawsuit are Delaware, Florida, Hawaii, Idaho, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nevada, New York, North Dakota, Ohio, Pennsylvania, Virginia and Washington.

Named as defendants are Heritage Pharmaceuticals, Inc., Aurobindo Pharma USA, Inc., Citron Pharma, LLC, Mayne Pharma (USA), Inc., Mylan Pharmaceuticals, Inc. and Teva Pharmaceuticals USA, Inc.

“The principal architect and ringleader of the conspiracies identified herein is Defendant Heritage,” the suit says. “Through its senior-most executives and salespersons, Heritage organized and initiated a wide-ranging series of conspiracies which included numerous generic drug manufacturers, all of whom were knowing and willing participants. Collectively, Defendants were able to obtain a substantial windfall as a result of these illegal agreements.”

Bloomberg news disclosed the existence of the criminal investigation a month ago.

In the charges made public Wednesday, the Justice Department alleged that Jeffrey Glazer and Jason Malek, then senior Heritage executives, conspired to fix prices on the same two drugs involved in Jepsen’s lawsuit.

Heritage offered little additional comment Thursday beyond the statement it made about the criminal investigation:

“In August 2016, following an internal investigation that revealed a variety of serious misconduct by the individuals charged today, Heritage Pharmaceuticals terminated them. We are fully cooperating with all aspects of the Department of Justice’s continuing investigation. 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.”

Denise Bradley, a senior vice president of Teva, said, “We have not found evidence that would give rise to any civil or criminal liability.”

Mylan’s chief executive officer, Heather Bresch, was called before Congress this year to defend her company’s steep increases in the price of its EpiPen, an injector used by individuals with life-threatening allergies. The EpiPen is not an element of the lawsuit filed Thursday.

After her testimony, the New York Times described Bresch, the daughter of U.S. Sen. Joe Manchin, D-West Va., as America’s “new pharmaceutical villain.”

In a statement Thursday about Jepsen’s lawsuit, the company said, “To date, we know of no evidence that Mylan participated in price fixing.”

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