In early December 2021, the United States Federal Trade Commission (FTC), along with several state co-plaintiffs (New York, California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia), filed an order in court indicating a $40 million settlement had been reached with Vyera Pharmaceuticals. Readers may remember the “pharma bro” saga with former Vyera CEO Martin Shkreli, during which Vyera raise the price of Daraprim from $17.50 to $750 per tablet in 2015.
The Complaint
The order follows a January 2020 complaint against Shkreli, his associate Kevin Mulleady, their company Vyera Pharmaceuticals, LLC, and its parent company Phoenixus AG. Enforcers alleged that Shkreli (currently in prison for securities fraud) and Mulleady raised the price of Daraprim by 4000 percent and then created an elaborate web of restrictions to illegally block competitors from producing a cheaper option.
The complaint alleges that Shkreli and Mulleady started Vyera with a plan to purchase a life-saving drug, raise the price significantly, and use anticompetitive contracts to block competition. Vyera acquired Daraprim in 2015 and immediately raised the list price from $17.50 to $750 per tablet. According to the complaint, after acquiring the drug and raising the list price, Vyera created a web of anticompetitive restrictions to box out the competition. Some of the anticompetitive actions included entering into resale-restriction agreements with distributors that prevented generic companies from procuring the drug for FDA-mandated testing; entering into exclusivity agreements with the suppliers of a critical input known as pyrimethamine API; and signing data-blocking agreements with two key distributors to prevent them from releasing Daraprim sales data, which masked the true size of the market opportunity for potential generic competitors. The complaint alleges that this scheme delayed generic competition for years and caused tens of millions of dollars in harm to consumers.
The Order
Under the order, Vyera and its parent company Phoenixus AG are required to pay $10 million immediately and $30 million over the next ten years, if the companies’ financial condition improves. Additionally, Vyera and Phoenixus are required to make Daraprim available to any generic competitor at list price and to provide prior notification of any planned pharmaceutical transaction valued at $25 million or more. Mulleady, Vyera, and Phoenixus also are prohibited for 10 years from engaging in any conduct similar to what is alleged by the FTC and the states in their amended April 2020 complaint.
Mulleady is also generally banned from working for, consulting for, or controlling a pharmaceutical company for seven years and is subject to a $250,000 suspended judgment if he is found to have violated the terms of this order.
This settlement resolves all claims brought by the FTC and the state co-plaintiffs, as well as those brought in a related class action suit, except for the antitrust charges that Shkreli is facing. His trial is scheduled to begin December 14, 2021. As alluded to above, this trial follows his 2018 sentence of 7 years in prison on federal charges of wire and securities fraud. He was also banned from any role in the pharmaceutical industry for seven years during that trial as well.
FTC Statement
“Today’s action puts money back in the pockets of drug patients fleeced by a monopolistic scheme,” said FTC Chair Lina M. Khan. “Martin Shkreli masterminded an elaborate plan to dramatically jack up the price of life-saving drug Daraprim by blocking cheaper options. While litigation against Shkreli continues, the order shuts down the illegal enterprise run by his companies, Vyera and Phoenixus, and bans his associate from the industry. This strong relief sets a new standard and puts corporate leaders on notice that they will face severe consequences for ripping off the public by wantonly monopolizing markets.”