‘Cover is blown’ after drug price-fixing complaint unsealed

(Information provided by the Office of the Mississippi Attorney General)

Unredacted emails provide evidence of a conspiracy to inflate prices, hinder competition, and obstruct justice.

Just over two weeks after asking a judge to unseal the complaint in a massive generic drug price-fixing lawsuit, the motion has been granted, and Attorney General Jim Hood and 41 other states released the full, unredacted complaint against Teva Pharmaceuticals and 19 of the nation’s largest generic drug manufacturers.

Among the evidence now public are emails between generic drug manufacturers coordinating their response to a Congressional inquiry, emails enforcing “fair share” and “playing nice in the sandbox” market allocation, “fluff pricing” strategy and other brazen coordination to artificially inflate prices, hinder competition and unreasonably restrain trade across the industry.

The lawsuit was filed on May 10 in U.S. District Court for the District of Connecticut.

“As I said when filling the motion to unseal this complaint, the public deserves to know the illegal, greedy acts committed by these companies,” General Hood said. “The evidence shows an industry-wide conspiracy to hinder access to drugs that Americans rely on every day. It shows that these people knew that what they were doing was illegal and then took measures to make sure their actions weren’t uncovered. Today, their cover is blown.”

Not-so-‘Polite’ Letters

In early October 2014, Heritage Pharmaceuticals received a letter from Congressman Elijah Cummings and Senator Bernie Sanders as part of their joint investigation into price increases in the generic drug industry. Now emails unsealed by the court show that Heritage outside counsel immediately coordinated a response with counsel for Teva and Mylan.

“No emails please”

Executives knew their behavior was illegal, and they sought to cover their tracks by limiting communication in writing. Still, ample written evidence of their conspiracy has now been released that show consciousness of guilt. (pg. 50)

“I guess this is what they call co-opetition”

In one series of exchanges, senior executives at Mylan and Sandoz allegedly colluded to divvy up market share for a blood pressure medication. Both companies were the first to launch generic Valsartan on the same day, September 12, 2012. Leading up to the launch, records show company representatives spoke at least 21 times by phone to divvy up the market so that each competitor could obtain roughly 50 percent market share. The conspiracy apparently pleased company executives, including a Sandoz executive who states, “sometimes a little help from our competition is welcome as well.” Another senior executive replied: “I guess this is what they call ‘co-opetition.”

 High-Quality Competitors

As Director of National Accounts at Teva, Defendant Nisha Patel’s primary responsibility was to implement price increases. The complaint alleges that she did this by systematically conspiring with Teva’s competitors and maintained a ranking system of Teva’s competitors based on their collusive relationships, with +3 assigned to the most collusive and -3 assigned to the least. Detailed rankings and charts documenting her communication with competitors have been unsealed. (pgs. 176, 183)

 

Industry Code Words Revealed: Playing Nice in the Sandbox, Fair Share, Fluff Pricing (pg. 147)

The unredacted complaint reveals commonly used code words used by coconspirators as they colluded with competitors to divvy up market share and coordinate on price increases in violation of federal antitrust law. These include “fair share,” “playing nice in the sandbox,” and “fluff pricing.”

The complaint is the second to be filed in an ongoing, expanding investigation that could possibly be the largest cartel case in the history of the United States. The first complaint, still pending in U.S. District Court in the Eastern District of Pennsylvania, was filed in 2016 and now includes 18 corporate defendants, two individual defendants, and 15 generic drugs. Two former executives from Heritage Pharmaceuticals, Jeffery Glazer and Jason Malek, have entered into settlement agreements and are cooperating with the attorneys general working group in that case.

In addition to Mississippi, Alabama, Alaska, Arizona, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Puerto Rico joined the suit.