Dive Brief:
- Connecticut Attorney General George Jepsen, along with 45 other attorneys general, announced Tuesday afternoon the expansion of a major antitrust litigation aimed at generic drug manufacturers.
- Originally targeted at six companies — including Mylan Pharmaceuticals Inc. and Teva Pharmaceuticals USA Inc. — the investigation has widened in scope to now include 18 companies, accused of colluding to raise prices and limit competition on 15 generic drugs.
- For the first time, two top executives are named in the lawsuit: Mylan N.V. President Rajiv Malik and Emcure Pharmaceuticals Ltd. CEO Satish Mehta.
Dive Insight:
Stepping up a three yearlong investigation, attorneys general from 46 states are increasing the scope of a lawsuit against the generic drug industry, accusing companies and executives of running well-coordinated conspiracies to allocate markets, manipulate competition and fix prices.
The suit alleges this conduct took place over many years and was conducted at industry conferences, as well as through email, phone and text messages.
"The allegations of our complaint are shocking, and the depth and breadth of the conspiracies alleged are mind-blowing," said Jepsen in a Oct. 31 statement. "The harm caused to America's economy and households is real — additional financial burdens for patients paying for needed medications, higher premiums as health insurers pass higher drug costs onto consumers and greater costs to cash-strapped states paying for care through public health insurance programs."
The state-led investigation is on top of a similar investigation being conducted by the Department of Justice. In December, the DOJ brought charges against two Heritage Pharmaceutical executives for their role in anti-competitive activities (Heritage is the parent company of Emcure).
At least one analyst does not believe these allegations are going to be a major financial impediment for the companies. "Nonetheless, whatever the reasons (and although the headlines are clearly unpleasant) we believe the potential for any real meaningful fines is unlikely — and even if issued — likely very manageable," wrote Cowen analyst Ken Cacciatore in a note to clients, calling the investigation "an ongoing 'name and shame' exercise."
Cacciatore estimates a settlement could be in the $300 million to $700 million range, spread across multiple companies. "As a result of this investigation, the broader issue may be the further chilling effect that this will have on companies of traditionally taking opportunistic pricing actions if there are shortages or competitive exit," he added.
Yet, Evercore ISI analyst Umer Raffat pointed out in a note to investors that the statements during a press conference on Tuesday could indicate the attorneys general are seeking a series of settlements and not just one large settlement to be split amongst the companies.
The attorneys general also indicated that there will be more companies and more executives that get included in the suit as the investigation draws on.
Mylan responded to the allegations against Malik, saying it has "deep faith" in his integrity and that it intends to "vigorously defend" against the allegations.
"We have been investigating these allegations thoroughly and have found no evidence of price fixing on the part of Mylan or its employees," added the drugmaker. "We have asked the various attorneys general leading this case to share with us what information they believe supports these new allegations and, to date, they have not done so."
While the suit may only lead to fines for each of the companies, and potentially minimal ones, the press surrounding the scandal shines a light on bad practices in the industry.
Mylan, in particular, has been under fire for its handling of the EpiPen pricing, and further bad press for the company is certainly unwelcome from the point of view of shareholders.