US states file amended litigation accusing 20 generic drugmakers of price fixing

Attorneys General from more than 40 states in the US and Puerto Rico have filed a lawsuit in federal court in Connecticut accusing 20 generic drug manufacturers, as well as certain executives, of conspiring to artificially increase the prices of more than 100 treatments. The litigation significantly expands a lawsuit filed by 20 states in 2016. Companies targeted in the amended lawsuit include Novartis' Sandoz unit and Teva. 

Connecticut Attorney General William Tong remarked "we have hard evidence that shows the generic drug industry perpetrated a multibillion dollar fraud on the American people," adding "we have emails, text messages, telephone records and former company insiders that we believe will prove a multi-year conspiracy to fix prices and divide market share for huge numbers of generic drugs."  

According to the lawsuit, generic drugmakers initially operated under an agreement to avoid competition and accept what was deemed a fair market share by not lowering prices. The litigation contends that by 2012, Teva sought to increase the collusion to a new level.  

Specifically, the complaint alleges that Teva selected a core group of competitors to jointly raise prices on certain treatments. The lawsuit states that Teva increased the prices of approximately 112 generic products between 2013 and 2015 and colluded with competitors on at least 86 treatments. According to the lawsuit, the sizes of the price hikes exceeded 1000 percent in some cases.  

Teva chief financial officer Michael McClellan stated "we shall defend ourselves vigorously; there are many accusations, but we'll defend ourselves," continuing "there have been no developments in this area, and we regard it seriously."  

Commenting on the news, Israel Brokerage & Investments analyst Steven Tepper noted that while states did not specify the desired damages and penalties, potential fines could surpass $2 billion based on the profits companies were amassing during the period in question. The litigation comes as Teva seeks to reduce its $29-billion debt load.  

"To take this in proportion, that's about a year's worth of free cash flow that will have to be thrown out instead of used to reduce the debt," Tepper explained, adding "the companies will most likely drag this lawsuit out for a number of years and Teva could be in much better shape then than it is in today. But a major fine is still not a nice situation."  

The news comes as the Department of Justice (DOJ) recently disclosed that it planned to introduce new antitrust charges against generic drugmakers in coming weeks as part of its ongoing investigation into price collusion in the generic drug sector. 

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