Price-Fixing Allegations Against Generic Drug Manufacturers Broaden as State Attorneys General Seek Amended Complaint

On October 31, 2017, the Attorneys General of forty-five states and the District of Columbia (the “State AGs”) moved to amend a December 2016 complaint alleging a broad price-fixing scheme among key players in the generic drug industry. The motion to amend, filed in United States District Court for the Eastern District of Pennsylvania, seeks to add numerous generic drug companies to the list of defendants named in an earlier complaint. The motion further seeks the court’s permission to add a number of medications to the list of drugs for which prices were allegedly fixed.

The original complaint, filed in December 2016, accused six generic drug makers – Mylan Pharmaceuticals, Inc., Heritage Pharmaceuticals, Teva Pharmaceuticals USA Inc., Aurobindo Pharma USA Inc., Citron Pharma LLC, and Mayne Pharma USA Inc. – of conspiring to fix prices for two generic drugs (doxycycline hyclate delayed release, an antibiotic, and glyburide, an oral diabetes medication), causing dramatic spikes in the cost of the drugs. With their October 31 filing, the State AGs seek to add twelve companies to the list of defendants, and thirteen medications to the list of drugs implicated in the alleged scheme.

Importantly, the expanded complaint also names two senior executives who are alleged to have engaged in the price-fixing scheme. The State AGs claim that these two individuals – the president and executive director of Mylan NV and the CEO and managing director of Emcure Pharmaceuticals in India – spoke directly and agreed with one another on their companies’ respective market shares for doxycycline hyclate.

The State AGs’ filing notes that the case stems from a July 2014 non-public investigation conducted by the State of Connecticut into allegedly suspicious generic drug price increases, and that more states joined the case as outrage grew over large increases in generic drug prices. Indeed, the case brought by the State AGs follows years of Congressional inquiries and grand jury investigations led by the United States Department of Justice, Antitrust Division. These federal investigations remain ongoing, and have already led to the January 2017 guilty pleas of two former Heritage Pharmaceuticals (an Emcure subsidiary) executives to federal charges of conspiring to fix prices by dividing up the market for doxycycline and glyburide, a diabetes drug.

Price fixing is a per se offense and can lead to jail time for an individual officer and a significant fine for a company. Under the Sherman Act, 15 U.S.C. Sec. 1, jail sentences are generally around 12 months, but they could be higher depending on various factors. Both federal and state enforcement agencies are very aggressive when it comes to prosecuting price fixing. This has occurred in both Democratic and Republican Administrations. Companies should be very sensitive to these issues, particularly if you believe there may be some rogue employees involved.

If you believe you have an issue in this area, please call Jeffrey Jacobovitz to discuss it. Mr. Jacobovitz is a former Federal Trade Commission attorney and has significant experience in defending companies and individuals in criminal antitrust matters. He is the former Vice-Chair of the Criminal and Cartel Committee of the A.B.A.’s Antitrust Section.