With excessively high price increases, the generic drug industry has faced multiple controversies over the years. Such issues arise from staggering price hikes for the treatment of severe medical conditions that further point towards price-fixing allegations.
Disagreements were already brought on by the 5,400% increase of the generic drug price of Daraprim used to treat deadly parasite infections. The 500% price hike of EpiPen for the treatment of harmful allergic reactions was also met with criticisms.
Looking into these circumstances, executives of generic drug companies should expect increasingly hard-hitting legal consequences associated with unjustifiable price increases. Two federal court lawsuits were filed separately- one by Heritage Pharmaceuticals against its former executives and another by 20 states against six organizations, including Heritage.
In November, Heritage filed its lawsuit against former executives Jeffrey Glazer and Jason Malek with the aid of the Racketeer Influenced and Corrupt Organizations Act (RICO). A month later, 20 states also accused Heritage and five other companies following an antitrust investigation by Connecticut.
Daniel Anziska, a member of the legal counsel team of New York’s Troutman Sanders LLP, referred to such incidents as a “new development.” “This is kind of a new permutation. It’s been going on a couple years, the investigation. But this is kind of what’s starting to trickle out of it,” Anziska said.
Brothers-in-law Glazer and Malek were accused of stealing tens of millions of dollars from Heritage. In the lawsuit filed in the New Jersey’s U.S. District Court, the duo was claimed to have misused business opportunities, illegally raked in compensation for themselves and misappropriated intellectual property. Glazer and Malek pulled off such theft through the creation of at least five fake companies that were used to draw off Heritage’s earnings by means of racketeering schemes.
Subsequently, the pair were accused of illicit generic drug price fixing as criminal charges were filed by the U.S. Department of Justice. Glazer and Malek were charged for making up dummy corporations to arrange racketeering schemes and illicitly take their company’s profits. Following the pair’s admission of wrongdoing, they pleaded guilty to two counts of felony and will be sentenced on April 10.
In addition, a civil lawsuit was filed against six pharmaceutical companies relating to suspicious generic drug price increases. The complaint claims that drug companies Heritage, Aurobindo Pharma USA Inc., Citron Pharma LLC, Mayne Pharma (USA) Inc., Mylan Pharmaceuticals Inc. and Teva Pharmaceuticals USA Inc. handled drug prices by fixing them or splitting up markets. According to the lawsuit, this investigation by the state of Connecticut revealed a “broad, well-coordinated and long-running series of schemes to fix the prices and allocate markets for a number of generic pharmaceuticals in the United States.”
According to experts, such lawsuits involving elaborate theft schemes and illegal fixing of generic drug prices will result to the development of other cases. Companies and their executives, for instance, could illicitly touch on wholesale manufacturing and other aspects of the drug industry. “So following that template, the presumption is that this is the tip of the iceberg…So, I don’t think that this is the end. To me, this is the beginning of this next round,” Anziska added.
