States’ lawsuit accuses generic-drug makers of fixing prices

Reporting from Boston —  Attorneys general from more than 40 states are alleging the nation’s largest generic drug manufacturers conspired to artificially inflate and manipulate prices for more than 100 different generic drugs, including treatments for diabetes, cancer, arthritis and other medical conditions.

The lawsuit, filed in federal court in Connecticut, also names 15 individual senior executives responsible for sales, marketing and pricing.

Connecticut Atty. Gen. William Tong, a Democrat, said investigators obtained evidence implicating 20 firms.

“We have hard evidence that shows the generic drug industry perpetrated a multibillion-dollar fraud on the American people,” Tong said. “We have emails, text messages, telephone records and former company insiders that we believe will prove a multiyear conspiracy to fix prices and divide market share for huge numbers of generic drugs.”

Tong said the investigation had uncovered a primary reason why the cost of healthcare — and specifically generic prescription drugs — has been so high in this country.

The surging prices of prescription drugs have drawn the attention of a number of politicians across the political spectrum from President Trump to liberal Democratic presidential candidate Sen. Elizabeth Warren of Massachusetts.

The lawsuit, filed Friday, was the second that has been filed in the investigation. The first, filed in 2016, named 18 corporate defendants and two individual defendants. Two former drug company executives entered into settlement agreements and are cooperating with the attorneys general in the investigation.

A spokesman for one of the companies named in the suit, Teva Pharmaceuticals USA Inc., a subsidiary of Israeli-based Teva Pharmaceuticals Industries, said Teva hasn’t engaged in any conduct that would lead to civil or criminal liability.

“The allegations in this new complaint, and in the litigation more generally, are just that — allegations,” Kelley Dougherty, a Teva vice president, said in a statement Saturday. “The company delivers high-quality medicines to patients around the world and is committed to complying with all applicable laws and regulations in doing so.”

Investigators said the drugs covered in the suit account for billions of dollars of sales in the United States.

The suit was filed by 43 states and Puerto Rico, with Connecticut taking the lead in the probe.

The suit alleges that for many years these makers of generic drugs operated under an agreement not to compete with one another and to settle instead for what these companies referred to as a “fair share” of the market to avoid pushing prices down through competition.

But by 2012, the suit says, Teva and the other companies decided to “take this understanding to the next level.” It alleges that “Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the United States.”

The suit says that the companies sought not only to maintain their “fair share” of the generic drug market, but also to “significantly raise prices on as many drugs as possible.”

To accomplish this goal, the suit says that Teva selected a core group of competitors with which it already had “very profitable collusive relationships,” and developed understandings to lead and follow each other’s price increases.

The suit contends that this resulted in “many billions of dollars of harm to the national economy over a period of several years.”

During a 19-month period beginning in July 2013, the suit says, Teva significantly raised prices on approximately 112 different generic drugs and on at least 86 of those increases it colluded with a group it referred to as “high quality” competitors.

The suit says that the size of the price increases varied but was over 1,000% for a number of the drugs.

The suit says that the defendants knew their conduct was unlawful and usually chose to communicate in person or by cellphone “in an attempt to avoid creating a written record of their illegal conduct.”

“When communications were reduced to writing or text messages, defendants often took overt and calculated steps to destroy evidence of those communications,” according to the suit.

The civil suit is asking for a finding that the defendants’ actions violated federal and state antitrust and consumer protection laws and is seeking a permanent injunction preventing the companies from continuing the conduct.

The suit also seeks reimbursement of profits from the actions and damages to be paid to the state agencies and consumers who were harmed by the drug company practices.