Major US lawsuit accuses generic drug makers of price-fixing

A large group of US states has accused as many as 18 key players in the generic drug industry – several of them based in India - of a broad price-fixing conspiracy, moving on Tuesday to widen an earlier lawsuit to add many more drugmakers and medicines.

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

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

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

However, the Indian shares of pharmaceutical companies named in the suit were largely unaffected and were in fact trading higher in an otherwise subdued market. According to a Business Standard report, all three listed pharmaceutical companies – Dr Reddy's Laboratories, Glenmark Pharma and Sun Pharma - were up more than 2 per cent each on the National Stock Exchange (NSE) today. At 09:46 am, the Nifty Pharma index, the largest gainer among sector indices, was up 2.8 per cent as compared to unchanged in Nifty 50 index at 10,441.

Besides these three stocks, Aurobindo Pharma, Cadila Healthcare and Lupin from the Nifty Pharma Index, and Ajanta Pharma, Marksans Pharma, Ipca Laboratories, Sanfoi India and Biocon in the non-index stocks, were up 3 per cent to 6 per cent.

The American 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 chief executive 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 Reuters' 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.

Price outrage
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 chief executive Martin Shkreli have been called in front of Congress to defend the cost of their products.

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.

The states are pressing a new complaint that would add Novartis AG's unit Sandoz, 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.

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 original lawsuit centred 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 US 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 US 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.