More Corporate Misbehavior: Generic Drug Makers Accused of Price Fixing

A broad, ongoing investigation into generic drug prices was the basis for a civil complaint, filed in December by 20 states, accusing two leading pharmaceutical companies of the price-fixing of two generic drugs. The inquiry continues as more drug makers receive subpoenas, and the final outcome is still unclear. “We believe that this is just the tip of the iceberg,” Connecticut Attorney General George C. Jepsen told the New York Times.
The complaint accuses two companies of conspiring to inflate prices of a delayed-release form of the antibiotic doxycycline hyclate, and of glyburide, a commonly used diabetes drug. One company, the Israeli drug manufacturer Teva Pharmaceuticals, is the world’s largest producer of generic medications.  The second company, Mylan, was widely criticized last year when it sharply raised the price of EpiPen, a severe allergy treatment. (EpiPen, a branded product, is not part of the investigation.)

The suit says that both Teva and Mylan engaged in anticompetitive behavior with other, smaller companies, not with each other. At the same time, Federal prosecutors made similar claims concerning the same two drugs against two former executives at Heritage Pharmaceuticals, one of the small companies named in the complaint.
The price-fixing was challenging to investigate, because executives of the companies coordinated with one another through informal gatherings, calls and text messages.  The complaint “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” (N.Y. Times). The lawsuit alleges that generic drug manufacturers wanting to market a new drug seek out rivals to negotiate agreements on how to maintain market share and avoid competing on price. “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.
More than 80 percent of all U.S. prescriptions are for generic drugs, which have been credited with saving consumers billions of dollars by introducing competing products when branded drugs lose patent protection. “It blows that entire assumption out of the water when you hear that generic companies are getting together to increase prices,” Rutgers Law School Professor Michael A. Carrier told the N.Y. Times.
A spokesman for the Generic Pharmaceutical Association, the industry’s lobbying group, declined to comment on results of the investigation.  “It’s very damning,” Connecticut AG Jepsen said. “It reveals a culture of cronyism.”
Craig Follis has extensive experience in litigation, negotiating and settling suits, and providing legal opinions on liability and insurance coverage. You can reach him at (888) 703-0109 or via email at cfollis@lawyersva.com.

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