Prosecutors in 47 of the 50 US states are investigating price collusion between 16 generic drug companies, including Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). The investigators allege a series of price-fixing conspiracies of massive proportions, the victims of which are consumers, medical insurance companies, taxpayers, pharmacies, and hospitals all over the US, which have borne the burden of prices driven up by hundreds, and sometimes thousands, of percentages. The drugs involved include drugs for treating hypertension, alleviating anxiety, and even antibiotics. Teva's share price was down 4% at the beginning of TASE trading.
In an expose published today by "The Washington Post," Connecticut assistant attorney general and antitrust investigator Joseph Nielsen described the case as "most likely the largest cartel in the history of the US." The investigators are probing price fixing involving 300 drugs. Companies saying that they suffered from this price fixing have already filed lawsuits against generic companies.
Other leading global generics companies under investigation alongside Teva include Mylan, Sun Pharmaceutical Industries, and Dr. Reddy's Laboratories. Teva did not respond to questions from "The Washington Post," but stated in a court filing that the allegations “are entirely conclusory and devoid of any facts.”
Sales of generic drugs in the US, designed to push down drug market prices, totaled $104 billion in 2017.Price gougers can gain billions of dollars by raising prices of even a small proportion of drugs for a few years, according to the investigators.
In one case, the price of albuterol, a drug for the treatment of asthma manufactured by Mylan and Sun, rose from $0.13 per pill to $4.70, a 3,400% increase. The prices for the drug were documented in a lawsuit against the generics industry by grocery chains that operate pharmacies, such as Kroger.
"The Washington Post's" story cited no examples of specific generic drug price increases by Teva. In February 2018, however, "The New York Times" described how Teva had set an astronomical price for its generic version of a drug for treatment of a rare disease.
When Teva launched Syprine, a generic drug for treatment of a disease featuring accumulations of copper in the body, it appears that the company was posing as a white knight come to rescue patients from the stunning price charged by Valeant Pharmaceuticals, manufacturer of the original drug: $21,267 for a bottle of 100 pills, according to "The New York Times."
In a press release announcing its generic version, described as a low-cost alternative, a Teva executive boasted that the new drug “illustrates Teva’s commitment to serving patient populations in need,” "The New York Times" reported. The press release, however, did not say what this lower cost was: $18,275 per bottle of 100 pills, according to Elsevier's Gold Standard Database.
Today's story in "The Washington Post" describes how executives at the 16 generics companies now under investigation developed a code language for use in their actions. The investigators say that "sandbox" meant the generic drugs market, "fair share" meant dividing up the market to ensure that every company made a profit, and "trashing the market" described a situation in which a competitor ignored the unwritten rules of the game by selling its products at less than the agreed price.
Cooperation between the companies in fixing drug prices turned an intensively competitive arena into a friendly club in which raising prices of identical generic drugs became almost routine. The relations between executives of the "competing" companies became so friendly that they took turns paying for their joint business dinners by name, alphabetically.
Although the companies under investigation deny breaking the law, the investigators have assembled a large number of documents, some of which are still undisclosed. The ongoing investigations are likely to produce additional evidence, a process that "The Washington Post" believes will move the generics companies to reach plea bargains with the prosecutors.
Published by Globes, Israel business news - en.globes.co.il - on December 10, 2018
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