Further US Lawsuit Claims Price-Fixing Conspiracy
Executive Summary
Teva, along with Mylan, Pfizer, Sandoz and 16 other generics manufacturers, have found themselves in the spotlight after a further multi-state US lawsuit has accused them of participating in a price-fixing conspiracy.
A second multi-state lawsuit has been filed in the US as part of an ongoing and expanding investigation into generic drug pricing.
Teva, along with Mylan, Pfizer, Sandoz and 16 other generics manufacturers, have been named in a Connecticut district court filing by a coalition of 44 US states that alleges “a broad conspiracy to artificially inflate and manipulate prices, reduce competition and unreasonably restrain trade for more than 100 different generic drugs.”
The Connecticut District Court Complaint
The medicines identified by the complaint include tablets, capsules, suspensions, creams, gels and ointments, with statins, ace inhibitors, beta blockers, antibiotics, anti-depressants, contraceptives, and non-steroidal anti-inflammatory drugs all identified in the filing. “The size of the price increases varied, but a number of them were well over 1,000,” the lawsuit claims.
Describing an “interconnected web of industry executives”, the allegations include details of competitors meeting with each other during industry dinners, “girls nights out”, lunches, cocktail parties and golf outings, with communications by telephone, email and text message helping to arrange illegal price-fixing agreements. The lawsuit seeks damages, civil penalties and actions by the court to restore competition to the generic drug market.
‘Multi-Billion-Dollar Fraud’
“We have hard evidence that shows the generic drug industry perpetrated a multi-billion dollar fraud on the American people,” Tong said. “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,” with the allegations constituting “possibly the largest cartel case in the history of the US.”
Acknowledging that the investigation was “still in its early stages,” Tong maintained that “we will not stop until these companies and the individuals who orchestrated these schemes are held accountable.”
Teva At The Centre Of Allegations
While 20 firms are named in the complaint, Teva is identified as “a consistent participant in the conspiracies”, although the complaint claims that “the conduct is pervasive and industry-wide.”
“Through its senior-most executives and account managers, Teva participated in a wide-ranging series of restraints with more than a dozen generic drug manufacturers, all of whom knowingly and willingly participated,” the filing states. “Teva consistently and systematically, over a period of several years,” engaged in “contracts, combinations and conspiracies that had the effect of unreasonably restraining trade, artificially inflating and maintaining prices and reducing competition in the generic pharmaceutical industry throughout the US.”
Claiming that the generics industry in the US operates on an understanding among firms “not to compete with each other” – and instead to settle for “fair share” – the filing says “this understanding has permeated every segment of the industry.”
“Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the US”
“Rather than enter a particular generic drug market by competing on price in order to gain market share, competitors in the generic drug industry would systematically and routinely communicate with one another directly, divvy up customers to create an artificial equilibrium in the market, and then maintain anticompetitively high prices,” it alleges. This understanding “was not the result of independent decision-making by individual companies to avoid competing with one another – rather, it was a direct result of specific discussion, negotiation and collusion among industry participants over the course of many years.”
“By 2012, Teva and other co-conspirators decided to take this understanding to the next level,” the complaint sets out. “Apparently unsatisfied with the status quo of ‘fair share’ and the mere avoidance of price erosion, Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the US.”
Claiming that Teva and its competitors “sought to leverage the collusive nature of the industry to not only maintain their ‘fair share’ of each generic drug market, but also to significantly raise prices on as many drugs as possible”, the complaint says that Teva “selected a core group of competitors with which it already had very profitable collusive relationships – Teva referred to them as ‘high quality’ competitors – and targeted drugs where they overlapped.”
“Teva had understandings with its highest quality competitors to lead and follow each other’s price increases, and did so with great frequency and success, resulting in many billions of dollars of harm to the national economy over a period of several years,” the complaint states.
“At the zenith of this collusive activity involving Teva, during a 19-month period beginning in July 2013 and continuing through January 2015, Teva significantly raised prices on approximately 112 different generic drugs. Of those 112 different drugs, Teva colluded with its ‘high quality’ competitors on at least 86 of them.”
Second Lawsuit In Ongoing Investigation
The latest lawsuit is part of the same ongoing investigation that prompted an earlier multi-state US suit to be filed in a Pennsylvania district court in 2016 against a host of generics firms containing similar allegations of price-fixing. This prompted companies concerned to seek an order preventing leaks of potentially harmful public allegations (Also see "Leaks And Prejudice Must End In US Multi-State Pricing Case" - Generics Bulletin, 21 Dec, 2018.), which was ultimately unsuccessful. (Also see "US Court Denies Attempt To Silence Leaks In Pricing Litigation" - Generics Bulletin, 8 Jan, 2019.)
More recently, insurer United Healthcare alleged a series of conspiracies between major players involving 30 different generic molecules or combinations, in a Minnesota district court complaint that alleged that US industry meetings hosted by the Generic Pharmaceutical Association (GPhA) – now known as the Association for Accessible Medicines (AAM) – provided “the perfect opportunity for defendants to implement and maintain their conspiracy”. (Also see "United Healthcare Targets Multiple Firms Over US Pricing" - Generics Bulletin, 25 Jan, 2019.)
The lawsuits come against the backdrop of a US market that has seen plummeting prices in recent years, forcing many major generics firms to reassess their presence in the territory and wiping millions of dollars off the value of certain assets – including Teva’s portfolio following its acquisition of Actavis. It is only recently that the industry has pointed to signs of the US market stabilizing.
AAM Says Its Code Ensures Antitrust Compliance
For its part, the AAM says it is “fully committed to compliance with all laws and to maintaining high ethical standards in the way we do business.”
“Illegal behavior, such as price-fixing or other violations of antitrust law, is inconsistent with AAM’s rules and procedures,” the association said. “We seek to maintain the highest ethical standards as we work to bring medicine to patients in the US.”
In particular, the AAM pointed out, its code of business ethics forms part of the association’s “established procedures and policies to help ensure compliance with the antitrust rules at our board meetings and all other AAM meetings.”
“We will continue to assess our antitrust policies,” the AAM maintained, “because we are committed to the idea that robust competition is the key to providing affordable and accessible medicines to patients while also constraining health care costs.”
“Generic drug and biosimilar developers support laws and regulations that promote competition.”