By TED CARTER
Talk often turned to price-fixing whenever leaders of generic drug companies gathered a half dozen or so years ago, say Mississippi’s attorney general and attorneys general of 46 other states.
The result: Mississippians and residents of the other states paid artificially inflated prices for generic drugs and continue to do so, say the states in a lawsuit first filed by Connecticut Attorney General George Jepsen in 2016. Mississippi and the other states joined the suit last year.
The suit initially focused on only two drugs and a handful of leading generic drug manufacturers – Heritage Pharmaceuticals, Aurobindo Pharma USA, Citron Pharma, Mayne Pharma (USA), Mylan Pharmaceuticals, and Teva Pharmaceuticals USA. Today, the suit involves at least 16 companies and 300 prescription drugs.
The Washington Post reported in early December that the lawsuit and related cases picked up steam the previous month when a federal judge ruled that more than 1 million emails, cellphone texts and other documents cited as evidence could be shared among all plaintiffs.
The leader of the suit, Connecticut’s Jepsen, predicted in an emailed statement there is plenty more to come beyond the 300 drugs and number of companies so far involved. This, the email from Jepsen’s office said, is but “the tip of the iceberg in terms of the scope of this industry-wide investigation.”
With the alleged collusion, the states say, makers of generic drugs created a “cartel” that greatly damaged the promise that a competitive generic drug market would lower prices for consumers.
Generic drug company executives “sowed the seeds” for the price run-ups at trade shows, conferences, industry dinners, girls nights out or any other event in which interaction was possible, the multi-state lawsuit claims.
“First, to avoid competing with one another and thus eroding the prices for a myriad of generic drugs, defendants — either upon their entry into a given generic market or upon the entry of a new competitor into that market — communicated with each other to determine and agree on how much market share and which customers each competitor was entitled to,” the complaint states.
“They then implemented the agreement by either refusing to bid for particular customers or by providing a cover bid that they knew would not be successful. Defendants agreed to allocate the market for Nimodipine, Meprobamate, Zoledronic Acid, and Doxycycline Hyclate Delayed Release, among others,” it adds.
The Mississippi Attorney General’s Office declined to be interviewed or to respond to submitted questions about the suit.
In the filing, Attorney General Jim Hood charged that the “conduct was not only anti-competitive but was also unfair and deceptive to the consumers of the State of Mississippi.”
The action, Hood said, violated the Mississippi Consumer Protection Act and entitles the state to injunctive relief, damages, disgorgement, civil penalties, costs and attorney fees.
The price collusion may have cost Mississippi taxpayers as well by inflating prices for generic medications paid for by the Mississippi Division of Medicaid. In fiscal 2018 from July 1, 2017 through June 30 this year, the Division of Medicaid spent $22 million on generic drugs. It spent another $102 million on brand-name drugs.
In a response to a request for comment, the Association for Accessible Medicines, a main trade group for the generic drug sector, did not directly address the multi-state claims other than to say the Association and member companies support competition and oppose price-fixing.
A spokesperson for the Association said the recent Washington Post article “recycles years-old allegations that are inconsistent with an industry providing patients enormous measurable health care savings through competition.”
The AMM spokesperson said that 93 percent of generic prescriptions are filled for $20 or less. “No category of health care provides lower prices year-over-year like FDA-approved generic medicines,” the spokesperson said, and insisted the industry has a robust system for ensuring compliance with anti-trust laws.
The litigation is in discovery and is with the Judicial Panel on Multidistrict Litigation in Philadelphia, according to the Connecticut AG’s office.
The Justice Department began its own probe following the start of the Connecticut AG’s investigation. That led to guilty pleas to federal criminal charges by two former executives of generics maker Heritage Pharmaceuticals. They are cooperating with the Justice Department in a parallel criminal case.
Now that the Justice Department is involved, civil suits on behalf of organizations, companies and individual consumers could follow, lawyers said in a National Public Radio report.
Law firms that specialize in class actions have already lined up as many as 80 companies that may have paid too much, including retail pharmacies, employee unions and insurance companies, according to NPR.
In an interview with NPR, Jason Dubner, an attorney for Chicago’s Butler, Rubin, Saltarelli & Boyd, said the allegations are so massive that prices throughout the generic industry could have been affected. “You start to get an understanding just how widespread this alleged conspiracy was to cover so many different types of cures,” he said.
Meanwhile, lawyers handling the multi-state suit will try to show that generic drug makers established a conduct code by which they would conspire to inflate prices and keep them that way.
It worked like this, they say: Any time a company is entering a particular generic drug market, it can contact its competitors and allocate the market according to a generally agreed-upon standard of “fair share” in order to keep prices high and avoid competing.
Knowing the practices amounted to anti-trust violations, the company leaders usually chose to communicate in person or by cell phone, in an attempt to avoid creating a record of their illegal conduct, the suit charges. The structure of the generic drug industry provided numerous opportunities for “collusive communications at trade shows, customer events and smaller more intimate dinners and meetings,” the suit says.
When communications were reduced to writing or text message, the companies often “took overt and calculated steps to destroy evidence of those communications,” it adds.
Many generic drug manufacturers, including several named in the suit, are headquartered in close proximity to one another in New Jersey or eastern Pennsylvania, giving them additional opportunities to foster connections and meet and collude, according to the lawsuit.
As is the practice for cartels, companies named in the suit monitored and tracked each others’ fair share, and discussed it with each other in the context of agreements on specific drugs, the suit alleges.
The complaint asks for treble damages for the states taking part in the suit.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info