Recently, attorneys general of fifty-one states and United States territories filed a complaint alleging that seventeen generic drug manufacturers fixed prices of topical skin treatments, claiming that the schemes went back for more than a decade.
The complaint comes out of an ongoing investigation built on evidence from multiple cooperating witnesses at the core of the alleged conspiracy, a document database of over 20 million documents, and a phone records database with millions of call detail records and contact information for more than 600 sales and pricing individuals in the generic drug industry.
The investigation uncovered that between 2007 and 2014, three generic drug manufacturers – Taro, Perrigo, and Fougera (now Sandoz) – sold nearly two-thirds of all generic topical products dispensed in the United States. The investigation uncovered comprehensive and direct evidence of unlawful agreements to minimize competition and raise prices on topical products.
According to the complaint, the generic manufacturers violated the Sherman Antitrust Act, which protects against market allocation and price fixing. The complaint alleges that the executives would divide the market by declining to bid for the business of certain drug store chains or distributors when a competitor entered the market. Additionally, price increases would be done in a coordinated fashion to largely sidestep competitive pressures.
In addition to the seventeen companies, ten executives are also named who allegedly participated in the scheme. The complaint covers eighty different drugs that were allegedly subject to market allocation, including hydrocortisone, mometasone cream, and latanoprost drops. According to the lawsuit, the market for topical drugs is easier to control because there are higher technical barriers to proving safety and efficacy and to winning regulatory approval.
Reactions and Responses
Connecticut Attorney General William Tong, the AG who led the coalition that filed the complaint, said, “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.”
Perrigo has indicated that it “intends to vigorously defend this case and looks forward to presenting a full defense.” Sandoz believes the allegations in the lawsuit have already been covered by a $195 million settlement made with the Department of Justice (DOJ) in March of this year. Taro has called the allegations “without merit.”
Conclusion
This is the third case filed by state attorneys general charging price collusion by generic drug manufacturers. The other two, one filed in 2016 and one in 2019, are still pending in a federal court in Pennsylvania.