U.S. states allege broad generic drug price-fixing collusion

[November 01, 2017]  By Karen Freifeld

WASHINGTON (Reuters) - A large group of U.S. states accused key players in the generic drug industry of a broad price-fixing conspiracy, moving on Tuesday to widen an earlier lawsuit to add many more drugmakers and medicines in an action that sent some company shares tumbling.

The lawsuit, brought by the attorneys general of 45 states and the District of Columbia, accused 18 companies and subsidiaries and named 15 medicines. It also targeted two individual executives: Rajiv Malik, president and executive director of Mylan NV, and Satish Mehta, CEO and managing director of India's Emcure Pharmaceuticals.

Shares of Pennsylvania-based Mylan, also named as a defendant, closed down 6.6 percent.

The states said the drugmakers and executives divided customers for their drugs among themselves, agreeing that each company would have a certain percentage of the market. The companies sometimes agreed on price increases in advance, the states added.

The states said Malik and Mehta spoke directly to one another to agree on their companies' shares of the market for a delayed-release version of a common antibiotic, doxycycline hyclate.

"It is our belief that price-fixing is systematic, it is pervasive, and that a culture of collusion exists in the industry," Connecticut Attorney General George Jepsen, who is leading the case, told a news conference in Hartford.

Mylan said in a statement it had found no evidence of price-fixing by the company or any of its employees, and vowed to defend itself vigorously. Malik, the company's second-ranking official, has received more than $50 million in compensation over the past three years, last year making more than CEO Heather Bresch.

"Mylan has deep faith in the integrity of its president, Rajiv Malik, and stands behind him fully," the company said.

Emcure, also a defendant in the case, did not immediately respond to a request for comment.

Two former executives of Emcure's subsidiary Heritage Pharmaceuticals pleaded guilty in January to federal charges of conspiring to fix prices and divide up the market for doxycycline and the diabetes drug glyburide.

The two men, former Heritage president Jason Malek and former chairman and chief executive Jeffrey Glazer, reached a deal with 41 states and territories in which they each agreed to pay $25,000 and cooperate with the state probe.

Soaring drug prices from both branded and generic drug manufacturers have sparked outrage and investigations in the United States. President Donald Trump this year accused pharmaceutical companies of "getting away with murder" with their drug pricing.

Executives like Mylan's Bresch and former Turing Pharmaceuticals CEO Martin Shkreli have been called in front of Congress to defend the cost of their products.

MORE COMPANIES TARGETED

The original complaint, filed in December, targeted Mylan, Heritage, Aurobindo Pharma USA Inc, Citron Pharma LLC, Mayne Pharma USA Inc and Teva Pharmaceuticals USA Inc.

Mylan NL CEO Heather Bresch is sworn in before a House Oversight and Government Reform Committee hearing on the Rising Price of EpiPens, at the Capitol in Washington, U.S. September 21, 2016. REUTERS/Yuri Gripas/File Photo

The states are pressing a new complaint that would add Novartis AG's unit Sandoz, India-based Sun Pharmaceutical Industries Ltd, Endo International PLC's unit Par Pharmaceutical, Dr. Reddy's Laboratories, Apotex Corp, Glenmark Generics Ltd, Lannett Company Inc, Alkem Laboratories Ltd's unit Ascend Laboratories and Cadila Healthcare Ltd's unit Zydus Pharmaceuticals Inc.

Jepsen said the investigation is continuing, and that claims would likely be brought against more companies, and possibly executives, in the future.

The news hurt shares of companies named in the expanded suit that are traded in the United States. In addition to Mylan's drop, Lannett lost 13.7 percent. Shares of Endo were up 7 percent, but down from their 12 percent peak before the news of the amended lawsuit.

Teva spokeswoman Denise Bradley said the company denied the allegations. Endo spokeswoman Heather Lubeski said the company would vigorously defend itself against the claims. Other companies did not immediately respond to requests for comment.

The expansion of the suit requires the court's permission.

The original lawsuit centered on just two medicines, delayed-release doxycycline and glyburide.

The price of doxycycline rose from $20 for 500 tablets to $1,849 between October 2013 and May 2014, according to U.S. Senator Amy Klobuchar, a Minnesota Democrat who had been pressing for action on high drug prices.

The amended complaint would expand the number of drugs to include glipizide-metformin and glyburide-metformin, which are among the most commonly used diabetes treatments.

Others include: acetazolamide, which is used to treat glaucoma and epilepsy; the antibiotic doxycycline monohydrate; the blood pressure medicine fosinopril; the anti-anxiety medicine meprobamate; and the calcium channel blocking agent nimodipine.

The U.S. Justice Department is conducting a parallel criminal investigation. On Friday, the department asked the Pennsylvania court presiding over the lawsuit to put the lawsuit's discovery process on hold, saying it could interfere with the criminal probe.

Connecticut Assistant Attorney General Joseph Nielsen said on Tuesday the states would likely oppose that request, which could slow the lawsuit.

(Reporting by Karen Freifeld in Washington; Additional reporting by Brendan Pierson and Michael Erman in New York; Writing by Diane Bartz; Editing by Chris Sanders and Will Dunham)

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