Over the past several years, some of the biggest names in the pharmaceutical industry have become embroiled in an endless string of controversies. First came the public outrage about the astronomical increase in prices for antiparasitic drug Daraprim, put into place by Turing Pharmaceuticals CEO Martin Shkreli, who has since suffered a precipitous fall from grace and gone to prison for securities fraud. Then, the nation watched in horror as the opioid epidemic spread like wildfire across the country – a crisis that we’ve since found out had been deliberately engineered by callous and profit-obsessed big pharma executives.
All the while, the pharmaceutical industry has continued to rake in record-setting profits, often on the backs of some of society’s most vulnerable members. Now, a recently unredacted complaint in an antitrust lawsuit is shedding new light on how those businesses may have been keeping their profits so high.
The complaint, filed this May in federal court by Connecticut’s Attorney General, in cooperation with 43 other states and Puerto Rico had initially been released in a heavily redacted form. Now, following a judge’s order in the case, the full 524-page complaint was made public a few weeks ago – and the details are as unseemly and infuriating as you might expect.
The complaint alleges that 20 corporate generic drugmakers and a handful of associated individuals have long been engaged in a conspiracy to inflate and fix prices on at least 100 different medications. The unredacted portions of the complaint include details of emails, phone calls, and other communications that paint a vivid picture of how these so-called competitors acted in concert to make sure that profits took precedence above all else. Here are some of the new details included in the complaint:
Drugmakers Worked Together to Stifle Congressional Oversight
Some of the more damning information in the complaint details how legal counsel for three separate pharmaceutical companies worked together to craft a response to an October 2014 inquiry from Senator Bernie Sanders and Representative Elijah Cummings regarding generic drug pricing. According to email excerpts included in the complaint, outside counsel for Heritage Pharmaceuticals and that of supposed rivals Teva Pharmaceuticals and Mylan sprang into action to coordinate a unified response. As Heritage’s outside counsel wrote to CEO Jeff Glazer:
“Spoke with my colleague [redacted] in DC who is doing the response letter for Mylan. Her husband works for [redacted] and he is doing the response for Teva,” and “They have both been in contact with GPhA on coordinating a response – and the consensus at this point is that the responses will be ‘polite f-u’ letters. She told me that Teva authorized [redacted] to schedule a conference call to coordinate the response and make sure everyone is on the same page.”
Taken together, the communications indicate a knowing and concerted effort to make sure that any attempts to peer into the secretive drug industry would come to naught. Needless to say, such coordination is unusual, but might be easy to explain given some of the other information contained in the complaint.
Competition in Name Only
To illustrate how deep the conspiracy to control the generic drug markets ran among the 20 companies named in the complaint, one need only look at some of the internal emails regarding the market share of certain drugs. Executives from drugmaker Sandoz traded emails about some 47 products where they felt they’d been denied a “fair share” of the overall market. They first traded jokes about lowering prices to capture a greater market share, but the idea was soon shelved in favor of outright collusion with Mylan, the competitor who controlled the market for the drugs in question.
Wrote one Sandoz executive, “sometimes a little help from our competition is welcome as well,” to which another responded, “I guess this is what they call ‘co-opetition.” The complaint then details at least 21 phone conversations between representatives of the two firms, which resulted in a plan to divide the market roughly in half.
The collusion within the generic drug business became so pervasive, according to the complaint, that Teva’s director of national accounts Nisha Patel even developed a ranking system for the competition. The ranks weren’t based on who they had to fend off, but rather on which companies were most likely to engage with them on price-fixing arrangements. Companies that showed a ready willingness to collude would gain a “highest quality” rating of +3, while uncooperative companies would receive a -3 – indicating that they should be excluded from future dealings.
Overlapping Social Circles
Tying the relationships between the companies together was a series of social events and gatherings attended by executives from all of the firms. Industry-sponsored golf outings, trade shows, and dinners became fertile ground for executives to build the relationships that made the industry-wide collusion possible, the complaint alleges. Emails referred to attendees from rival companies in collegial terms, like “fraternity brothers”, illustrating just how close they’d gotten. While such industry events aren’t explicitly illegal, the complaint indicates that what they were used to accomplish ran afoul of antitrust law.
A System Rotten to the Core
The lawsuit against the named defendants and pharmaceutical companies has yet to be adjudicated, but it’s clear that the evidence is quite damning on its face. If even a fraction of what the suit alleges is true, it reflects a pharmaceutical market that’s hopelessly rigged in favor of big business and against the millions of people who rely on the affected medications to stay alive and healthy.
It’s also difficult to believe that this is an isolated incident. The tone and language used in much of the communications between industry members included in the complaint point to practices that are well-established and entrenched in the industry. That would seem to indicate that we haven’t heard the last of allegations like these against the pharmaceutical industry – the only real question is when, or indeed if, the perpetrators of such schemes will be held to account.