Forty-five states, including Arizona, and the Department of Justice claim that generic drug prices are fixed, and the alleged collusion may have cost U.S. business and consumers more than $1 billion.
In their filing, prosecutors say that when pharmacies asked drug makers for their lowest price, the manufacturers would rig the bidding process.
Michael Cole, who heads the antitrust department at the Connecticut Attorney General’s office says:
The companies would work out in advance who would get the lowest price and then the other competitors may put in what we would call a cover bid, (Such bids give the appearance of competitive bidding.)
The fact that the Department of Justice is involved has caught the attention of class-action lawyers. Law firms that specialize in class actions have already lined up as many as 80 companies that may have paid too much, including retail pharmacies, employee unions and insurance companies. They predict more will join as the lawsuit progresses, perhaps even individual consumers.
Ronny Gal, a market analyst for Sanford Bernstein, says on average, the generic drug industry has lowered prices for consumers. But, he says, in an efficient marketplace, generic drug wholesalers should have kept prices in check. Gal says:
In a market that has only three or four really large distribution organizations, they are sometimes tempted to maximize their own profits in a way that does not always 100 percent reflect the best interest of their clients.
Based on what’s in the current lawsuit, Gal estimates an eventual settlement would be around $1 billion. But he says that number could go as high as $5 billion, especially if more drugs are included.
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Reuters reports the original complaint, filed in December, targeted Mylan, Heritage, Aurobindo Pharma USA Inc, Citron Pharma LLC, Mayne Pharma USA Inc and Teva Pharmaceuticals USA Inc.
The states are pressing a new complaint that would add Novartis AG’s unit Sandoz, India-based Sun Pharmaceutical Industries Ltd, Endo International PLC’s unit Par Pharmaceutical, Dr. Reddy’s Laboratories, Apotex Corp, Glenmark Generics Ltd, Lannett Company Inc, Alkem Laboratories Ltd’s unit Ascend Laboratories and Cadila Healthcare Ltd’s unit Zydus Pharmaceuticals Inc.
The investigation is continuing, and claims may likely be brought against more companies, and possibly executives, in the future.