A third US federal antitrust lawsuit, this time by New York Attorney General Letitia James, has been filed against generic companies and their senior executives for price fixing of drugs. This time the suit is, among others, against Israeli company Taro Pharmaceuticals and Perrigo Company (NYSE:PRGO; TASE:PRGO), which is traded on the TASE, as well as Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), for price fixing of topical dermatological drugs. Actavis is named in the suit, which Teva acquired in 2016.
In the previous such lawsuit a year ago, Teva was at the heart of the allegations, and named as one of the leaders of the colluders.
According to the latest lawsuit, between 2009 and 2016 there was extensive collusion between manufacturers of generic topical products (creams, gels, oils and ointments applied to the skin). In this filed there is usually a higher threshold for entry due to the technical difficulties of proving that a a product is identical in biological terms to the original product and that its production is more expensive and longer. Consequently, according to the suit, the market has only a limited number of rivals for each specific product, which creates fertile ground for collusion.
The lawsuit says, "Many topical products are marketed by only 2-3 competitors and the sales and pricing people in these companies know each other well and exploit their personal business connections as a way of colluding to limit competition, divide up customers and significantly put up prices for dozens of products."
The lawsuit adds, "The large and important companies in the sector include Taro, Perrigo, Fougera (renamed Sandoz) and Actavis (acquired by Teva - had agreements over many years not to compete between them for customers and to follow each other in putting up prices. In order to keep these illegal agreements, the rivals were in almost permanent contact, including meetings at conferences, telephone conversations and text messages."
"The defendants understood that their acts were illegal, and all of them made efforts to refrain from written communications, and to erase electronic messages after they were sent."
The lawsuit claims that in 2013 and 2014 the frequency of price rises intensified and prices of hundreds of generic products jumped by as much as 1,000% with no explanation. The manufacturers claimed that the reason was industrial consolidation and the closure of plants by the FDA and the like.
The lawsuit claims that the companies agreed with each other on a 'fair share of the market' for each product, and after they reached that share began to push up prices. It was no coincidence, the lawsuit says, that price rises slowed down after Connecticut opened an antitrust investigation in 2014.
Published by Globes, Israel business news - en.globes.co.il - on June 11, 2020
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