Pharmas named in major generic drug price-fixing suit

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Law enforcement authorities from dozens of states in the US have filed a federal complaint accusing 20 pharmaceutical companies – including Teva, Sandoz and Pfizer – of conspiring to hike generic drug prices, costing billions of dollars in overcharges and undermining government efforts to hold down medical costs. According to a report, New Jersey officials when announcing, said that costs for drugs were sometimes boosted by more than 10 times what they should have been, and that company officials, knowing they were violating the law, spoke in person or by cellphone "so as not to create a written record of their conduct."

The conspiracy was hatched at trade shows, cocktail parties and golf outings, according to a statement by state Attorney General Gurbir S Grewal, who said one of the meetings included more than a dozen high-ranking company executives and was held at a Bridgewater steakhouse, which was not identified in the complaint.

The report says New Jersey joined 43 other states in filing the civil lawsuit in federal court in Connecticut. Eleven of the companies are based in New Jersey while a 12th, Teva, has announced plans to move its US headquarters to the state. The suit also named 15 pharmaceutical executives as defendants, including five New Jersey residents.

"We all know that prescription drugs can be expensive," Grewal said. "Now we know that the high drug prices have been driven in part by an illegal conspiracy among generic drug companies to inflate their price."

The report says the suit called the companies' alleged actions "one of the most egregious and damaging price-fixing conspiracies in the history of the US." Grewal said that the companies violated federal anti-trust laws and various state laws, including New Jersey's Consumer Fraud Act. Authorities said the price increases affected common generic drugs, such as those used to control high blood pressure and cholesterol levels, along with drugs used by patients who have HIV. In court documents, they said the conspiracy "thwarted Congress's goal to lower the prices of drugs."

They also alleged that company officials involved in the alleged conspiracy "were aware their conduct was illegal" and made sure to "delete electronic communications after they were made." A Teva executive, authorities said, deleted text messages in 2015 after being warned by a colleague that the government was conducting an investigation and "showing up on people's doorsteps."

Grewal said the companies' executives used codes during conversations, such as "playing nice in the sandbox" to reference what he called the industry's "culture of collusion."

One portion of the complaint is titled "obstruction of justice, "with authorities saying company executives had been "coordinating consistently to obstruct the ongoing government investigations and to limit any potential response." The coordination began in 2014, they said, when Congress began investigating generic drug price increases.

Teva, an Israeli-based company that plans to move its US headquarters to Parsippany, was "a consistent participant in the conspiracies identified in this complaint, but the conduct is pervasive and industry-wide," the report says the prosecutors said in court documents. They said Teva raised prices on 112 generic drugs between 2013 and 2015, when the alleged conspiracy was taking place. "The size of the price increase varied, but a number of them were well over 1,000%," the complaint said.

The report says that Teva has denied wrongdoing, saying that the company "continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability." Other companies named in the suit did not respond to messages or could not be reached for comment.

Authorities said in court documents that they had obtained images from a Teva database called Delphi, where the company maintains records of all the products it sells "including those decisions that were made collusively." According to the report, they said in the complaint, which is more than 500 pages long, that they had been aided "by several as-of-yet unidentified cooperating witnesses who were directly involved in the conduct." They said companies not named in the suit are being investigated, adding that they would "likely bring additional actions" at some point.

The companies that are defendants in the case, authorities said, "are among the largest generic pharmaceutical manufacturers in the industry." Before 2012, Teva and other companies had been keeping generic drug costs artificially high by agreeing not to compete with one another, the suit alleges. That year, prosecutors said, the companies decided to "take this understanding to the next level."

The report says other companies named as defendants included Glenmark Pharmaceuticals of Mahwah and three companies based in Parsippany. Two of them, Actavis Holdco and Actavis Pharma, are related to Teva, according to the complaint. Wockhardt USA is the other Parsippany company.

In addition to Princeton-based Sandoz, the other New Jersey companies are Amneal of Bridgewater; Aurobindo of Dayton; Breckenridge of Fairfield; Dr Reddy’s Laboratories of Princeton; Greenstone of Peapack; and Zydus of North Pennington.

Pfizer, based in New York City, is among three New York-state based companies that are defendants. The others are Par Pharmaceutical Cos of Chestnut Ridge and Taro Pharmaceuticals of Hawthorne. Other companies named are Mylan of Canonsburg, Pennsylvania; Apotex of Weston, Florida; Lannett Co of Philadelphia; Lupin of Baltimore; and Upsher-Smith Laboratories of Maple Grove, Minnesota.

The report says the five New Jersey residents named are David Berthold, Montville, of Lupin; James Grauso, Ramsey, of Glenmark; Konstantin Ostaficiuk, Mendham, of Camber Pharmaceuticals, which is not named as a defendant; Richard Rogerson, Flemington, formerly of Actavis; and Tracy Sullivan DiValerio, Marlton, of Lannett.

The report says none of them responded to messages or could be reached for comment.


Connecticut Attorney General William Tong said investigators obtained evidence implicating 20 firms. “We have hard evidence that shows the generic drug industry perpetrated a multibillion-dollar fraud on the American people,” Tong is quoted in an report as saying. “We have emails, text messages, telephone records and former company insiders that we believe will prove a multi-year conspiracy to fix prices and divide market share for huge numbers of generic drugs.”

Tong said the investigation had uncovered a primary reason why the cost of health care – and specifically generic prescription drugs – has been so high in this country.

The report says the new court suit was the second that has been filed in the investigation. The first, filed in 2016, named 18 corporate defendants and two individual defendants. Two former drug company executives entered into settlement agreements and are cooperating with the attorneys general in the investigation. Investigators said the drugs covered in the suit account for billions of dollars of sales in the US.

The suit was filed by 43 states and Puerto Rico with Connecticut taking the lead in the probe. The report says the suit alleges that for many years these makers of generic drugs had operated under an agreement not to compete with each other and to settle instead for what these companies referred to as a “fair share” of the market to avoid pushing prices down through competition.

But by 2012, the suit says that Teva and the other companies decided to “take this understanding to the next level.” It alleges that “Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the US.” The suit says that the companies sought not only to maintain their “fair share” of the generic drug market but also to “significantly raise prices on as many drugs as possible.”

To accomplish this goal, the suit says that Teva selected a core group of competitors with which it already had “very profitable collusive relationships,” and developed understandings to lead and follow each other’s price increases. The suit contends that this resulted in “many billions of dollars of harm to the national economy over a period of several years.” During a 19-month period beginning in July 2013, the suit says Teva significantly raised prices on approximately 112 different generic drugs and on at least 86 of those drugs colluded with a group it referred to as “high quality” competitors. The suit says that the size of the price increases varied but was over 1,000% for a number of the drugs.

According to the report, the civil suit is asking for a finding that the defendants’ actions violated federal and state antitrust and consumer protection laws and is seeking a permanent injunction preventing the companies from continuing the conduct. The suit also seeks reimbursement of profits from the actions and damages to be paid to the state agencies and consumers who were harmed by the drug company practices. report report

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