States Sue Drug Companies and Execs for Generic Price-Fixing; Is the Tide Turning on Willingness to Allow Big Pharma a Get Out of Jail Free Card for its Egregious Behavior?

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Connecticut state attorney general William Tong led a coalition of 51 state attorneys generas and territories yesterday in:

filing the third lawsuit stemming from the ongoing antitrust investigation into a widespread conspiracy by generic drug manufacturers to artificially inflate and manipulate prices, reduce competition, and unreasonably restrain trade for generic drugs sold across the United States. This new Complaint, filed in the U.S. District Court for the District of Connecticut, focuses on 80 topical generic drugs that account for billions of dollars of sales in the United States. The Complaint names 26 corporate Defendants and 10 individual Defendants. The lawsuit seeks damages, civil penalties, and actions by the court to restore competition to the generic drug market.

Permit me to quote from the Connecticut press release at length, as it is both more complete and accurate than the secondary press coverage:

“These generic drug manufacturers perpetrated a multibillion-dollar fraud on the American public so systemic that it has touched nearly every single consumer of topical products. Through phone calls, text messages, emails, corporate conventions, and cozy dinner parties, generic pharmaceutical executives were in constant communication, colluding to fix prices and restrain competition as though it were a standard course of business. But they knew what they were doing was wrong, and they took steps to evade accountability, using code words and warning each other to avoid email and detection. Our case is built on hard evidence from multiple cooperating witnesses, millions of records, and contemporaneous notes that paint an undeniable picture of the largest domestic corporate cartel in our nation’s history. Our investigation is ongoing and expanding, and we will not rest until competition is restored and those responsible are held fully accountable,” said Attorney General Tong.

The Complaint stems from an ongoing investigation built on evidence from several cooperating witnesses at the core of the conspiracy, a massive document database of over 20 million documents, and a phone records database containing millions of call detail records and contact information for over 600 sales and pricing individuals in the generics industry. Among the records obtained by the States is a two-volume notebook containing the contemporaneous notes of one of the States’ cooperators that memorialized his discussions during phone calls with competitors and internal company meetings over a period of several years.

This action by most US states and territories is the third lawsuit in a similar vein, with prior actions that remain pending in 2016 and 2019. It targets 26 drug companies, and accuses the defendants of conspiring to rig the market between 2009 and 2016 for more than 80 drugs, according to Reuters, U.S. states accuse 26 drugmakers of generic drug price fixing in sweeping lawsuit.

Alloww me now to switch over to a press release issued by the office of Leticia James, New York state attorney general, Attorney General James Challenges Anticompetitive Conduct in the Generic Drug Industry, as it zeroes in on class considerations:

“Generic drugs are meant to provide consumers with reliable, cost-effective alternatives to name-brand medication, but because of a widespread conspiracy between these companies, consumers were left paying the bill while pharmaceutical executives lined their pockets with billions,” said Attorney General James. “These companies put profits over public health, which could have resulted in millions across the country being left without the vital medication they needed. Our coalition includes almost every state, district, territory, and province because Americans across the nation were cheated out of their money and it’s time

The entire swamp of pharmaceutical ‘sales’ needs draining, particularly in light of evidence that it takes so very little to sway doctors in what they choose to recommend, certainly less  than any major quid pro quo.

Could we read these continuing lawsuits as evidence that states are increasingly fed up with swinish behavior by Big Pharma, and decided to claw back some of its feeding at the trough?

I hope so. Because the rest of the world certainly is fed up with machinations by Big Pharma to profit uber alles from the COVID-19 crisis, including directing prophyphlactic recommondations and distorting treatment protocols, and research into the same, away from cheap, widely available options, such as hydroxychloriquine in favour of new, untested, branded options, including remdesivir. Not to mention a new vaccine – and highlighting the industry’s positioning for profit,.

This compares with the rest of the world, at least some of whom’s public health officials and drug companies  seems more interested in protecting people.

Now, I’m not opining on the contested science behind any of these decisions. Yet somehow, Big Pharma has strayed from a historical path where Alexander Fleming opted not to patent penicillin; and Jonas Salk decided likewise not to patent  his polio vaccine. Dare I say it: compare that historical record to where we are now.

One thing the COVID-19 crisis might do is lead us to reconsider the Bayh-Dohl model for commercialization of reaserch that manates from universities – and indeed, the entire patent-driven system. But I leave disussion of those issues to a future post.

Some details as to those continuing lawstuits, according to the NY state press release, for you legal junkies out there.:

The two prior state complaints have been consolidated for pretrial purposes in Multidistrict Litigation (MDL) 2724 in federal court in Philadelphia, in the U.S. District Court for the Eastern District of Pennsylvania. As with the earlier complaints, today’s dermatology complaint details pervasive antitrust violations in the industry that inflicted massive harms. It alleges that — to facilitate agreements to fix prices and allocate markets — competitors communicated, for example, when manufacturers were entering or leaving the market, when someone saw an opportunity to raise prices, when market shares were not “fair,” and when competitors did not “play nice.”

The multistate litigation continues to move forward, despite drug manufacturers’ continued attempts to delay a trial in the face of damaging evidence exposed against them. In 2017, U.S. District Judge Cynthia Rufe denied defendants’ motions to dismiss the states’ and other plaintiffs’ overarching conspiracy allegations. Following a case management order that compels defendants to produce significant materials from hundreds of custodians, defendants petitioned the United States Supreme Court for certiorari, which is pending.

The Wall Street Journal has the most extensive coverage of the event, States Sue Drug Companies, Executives Over Alleged Price Fixing. Alas, the most sriking thing about that article is the accompanying photo, given the COVID-19 threat. Of the 7 people in the background as Tong announced this lawsuit, not a single person, including Tong himself, wore a mask.

And we expect to defeat this pandemic?

Especially given the absence of a vaccine or proven therapies?

The best an individual can hope for is not to catch the disease,

And masks are one of the few safeguards we can rely on at present to limit disease spread.

If we acknowledge and understand: My mask doesn’t protect me. It protects you. And yours protects me.

So if we all mask up, we limit spread.

And perhaps by limiting spread, we could defeat COVID-109.

Or at minimum, alleviate much suffering.

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  1. Off The Street

    I, for one, would welcome some monopsonist behavior by, say, the VA and any state analogs, maybe even in concert, to exert some pressure on drug prices. They buy many drugs, supplies and equipment in large enough quantities to, er, move the needle.

    Of course, that would require politicians to vote in favor of their constituents and against their lobbyists, donors and other agents of influence. DC being what it is, such radical new buying power programs in the current environment would be accompanied by layers of neo-liberal BS and graft, with sweetheart deals, offshore accounts, phony exclusions and pretty much the current systemic problems.

    Imagine the voter reaction to a candidate that proposed and was able to garner support for a non-neo-liberal, transparent, clean, honest, decent, beneficial program! In DC, life advances one funeral at a time.

    1. Jerri-Lynn Scofield Post author

      Ah! I didn’t notice but should have. Still, my plea that we all mask up still stands.

  2. Carla

    I just don’t see the evidence that lawsuits change much. Until criminal charges are brought, I’m afraid, nothing will change.

    1. Jerri-Lynn Scofield Post author

      i think I agree with you Carla. But in the interim, I’ll continue to report on these incremental changes. Or else, go stick my head in the oven in despair!

    2. shinola

      The NSA probably has recordings of the phone calls. Not sure if those would be allowed as evidence though (IF the NSA could be persuaded to give them up).

  3. Pat

    I think Off the Street and Carla both have it.

    No real change occur until 1.) our politicians no longer act for their donors but for the voters and 2.) write legislation that both allows the two biggest buyers of drugs to negotiate prices and 3.) make price gauging a felony with both jail time and wage/bonus confiscation for drug company executives. And then both convict an executive and take everything they made in that position. I add the latter because not only can it fund prosecutions, I am pretty sure it is the bigger deterrent.

    1. Tom

      But what if voters don’t want change. Just look at the voting patterns of the primaries. If it weren’t for voters Biden wouldnt have won.

      1. sj

        Biden didn’t win. He was installed. Just saying. Don’t pin that one on the voters.

        But are you saying that “the voters” want to pay excessively high prices for medication that they need for their health and well-being?

  4. Kouros

    But the margins are soooo impossibly thin with face masks, there is no true profit there, is it? It is soooo much more profit with bottled water….

  5. LowellHighlander

    Ms. Scofield’s article here, I think, points to a deeper issue that few want to touch on: making public an industry whose output could determine the fates of millions. Clearly, it would be far more efficient to have a governmental agency conducting the research (in-house only – no outsourcing of any kind), performing the development, and bringing “to market” pharmaceuticals. This reporting here shows the perpetual tension between making a profit and keeping people alive.

    Of course, as an economist, I’m assuming that government and governmental agencies will be staffed by people who actually want government to work in the public interest. In the neo-liberal age, that’s an heroic assumption, I know.

    1. Carla

      Thank you for this. I agree that taking certain essential industries into the public sector (i.e., nationalizing them) should be done: banking and health care are two that come to mind. Even then, however, we would have to have real consequences for criminal behavior: prison time — nothing less.

    2. LowellHighlander

      Let me offer a correction to my original post: the government and government agencies would have TO BE LED by people who actually want government to work in the public interest. (These days, that makes me sound antediluvian, I know.) I am aware from many years of first-hand experience that governmental agencies are staffed mostly by people who want their agency to function in the public interest, despite economists’ insistence that American citizens be regarded as “consumers” of these agencies’ output.

  6. Bob

    Where is Federal law enforcement ?

    This alleged price fixing is a nation wide issue / behavior. So did Big Pharma violate any federal statues ?
    Wire and mail fraud anyone ?

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