3 PA Companies Conspired In Illegal Drug Price-Gouge Scheme: AG

Pennsylvania and 43 other states have accused 20 companies – three of which are in the Keystone State – of illegally conspiring to artificially inflate the prices of more than 100 generic drugs, according to the Office of Attorney General (see list below).

In a lawsuit filed in US District Court, the complaint also names 16 individual defendants – drug company executives responsible for sales, marketing, pricing and operations – and outlines their alleged involvement in “one of the most egregious and damaging price-fixing conspiracies in the history of the United States,” according to the OAG release.

Four of those defendants are from southeastern Pennsylvania, and include high ranking executives at locally-based companies.

"Drug companies meant to be competing against each other have instead worked together to drive up costs of Rx drugs," Attorney General Josh Shapiro said. "Led by execs seeking to up their own profit."

The complaint alleges that the price-fixing caused significant financial damage to state health plans, taxpayer-funded federal healthcare programs like Medicare and Medicaid, employer-sponsored health plans and individual consumers who pay out-of-pocket for their generic medications, according to the release.

Drugs subject to the unlawful pricing manipulations included all classes of medication, including oral antibiotics, blood thinners, cancer drugs, contraceptives, anti-inflammatory drugs, statins, anti-depressants, medications used to treat HIV, blood pressure medications and many more.

The collusive activity peaked between July 2013 and January 2015, according to the complaint, when one of the participants in the conspiracy, Teva Pharmaceuticals USA, Inc., is alleged to have significantly raised prices on about 387 formulations of 112 different generic drugs.

The size of the alleged price increases varies, but a number of drugs saw their prices soar by “well over 1,000 percent,” according to the release.

Corporatations accused include:

• Teva Pharmaceuticals USA, Inc., North Wales, Pa.
• Lannett Company, Inc., Philadelphia, Pa.
• Mylan Pharmaceuticals Inc., Canonsburg, Pa.
• Sandoz, Inc., Princeton
• Actavis Holdco US, Inc., Parsippany
• Actavis Pharma, Inc., Parsippany
• Amneal Pharmaceuticals, Inc., Bridgewater
• Apotex Corp., Weston, Fla.
• Aurobindo Pharma U.S.A., Inc., South Brunswick
• Breckenridge Pharmaceutical, Inc., Fairfield
• Dr. Reddy’s Laboratories, Inc., Princeton
• Glenmark Pharmaceuticals Inc. USA, Mahwah
• Greenstone LLC, North Peapack
• Lupin Pharmaceuticals, Inc., Baltimore
• Par Pharmaceutical Companies, Inc., Chestnut Ridge, NY
• Pfizer, Inc., New York City
• Taro Pharmaceuticals USA, Inc., Hawthorne, NY
• Upsher-Smith Laboratories, LLC, Maple Grove, Minn.
• Wockhardt USA, LLC, Parsippany
• Zydus Pharmaceuticals (USA), Inc., North Pennington

Individual defendants named in the complaint include:

• Maureen Cavanaugh, Hatboro, Pa. (former Senior Vice President and Chief Commercial Officer, North America, for Teva)
• Armando Kellum, Huntington Valley, Pa. (former Vice President, Contracting and Business Analytics at Sandoz)
• Kevin Green, Chalfont, Pa. (former Director of National Accounts at Teva from January 2006 through October 2013. Since November 2013, Green has worked at Zydus Pharmaceuticals (USA) Inc. as the Vice President of Sales)
• Nisha Patel, Collegeville, Pa. (former Director of Strategic Customer Marketing and later, Director of National Accounts at Teva.)
• Ara Aprahamian, Bardonia, NY. (Vice President of Sales and Marketing at Taro Pharmaceuticals U.S.A, Inc.)
• David Berthold, Towaco (Vice President of Sales at Lupin Pharmaceuticals, Inc.)
• James Brown, Littleton, Colo. (Vice President of Sales at Glenmark Pharmaceuticals, Inc.)
• Marc Falkin, former Vice President, Westin, Fla. (Marketing, Pricing and Contracts at Actavis)
• James Grauso, Ramsey (former Senior Vice President, Commercial Operations for Aurobindo from December 2011 through January 2014. Since February 2014, Grauso has been employed as the Executive Vice President, N.A. Commercial Operations at Glenmark)
• Jill Nailor, Mundelein, Ill., (Senior Director of Sales and National Accounts at Greenstone)
• James Nesta, Huntersville, NC (Vice President of Sales at Mylan)
• Kon Ostaficiuk, Mendham (President of Camber Pharmaceuticals, Inc.)
• David Rekenthaler, Marietta, Ga. (former Vice President, Sales US Generics at Teva)
• Richard Rogerson, Flemington (former Executive Director of Pricing and Business Analytics at Actavis)
• Tracy Sullivan DiValerio, Marlton (Director of National Accounts at Lannett)

A cornerstone of the conspiracy, the complaint alleges, was an understanding among the defendant companies that they would cooperate on pricing so each company could maintain a “fair share” of the various generic drug markets, according to the release. At the same time, the companies also colluded to “significantly raise prices on as many drugs as possible.”

Knowing their actions were illegal, corporate conspirators generally chose to talk in person or by cell phone, so as not to create a written record of their conduct, the complaint asserts.

During their conversations, the defendant executives frequently used coded terms like “playing nice in the sandbox” and “responsible competitor” to describe their anti-competitive efforts and to reference the industry’s engrained culture of collusion.

The industry’s many posh trade shows, cocktail parties, dinners, conferences, golf outings and other events provided opportunities for such face-to-face discussions, the complaint notes. And when communications were reduced to writing or text messages, the defendants often “took overt and calculated steps to destroy evidence” of them, according to the relase.

The lawsuit seeks damages, civil penalties and actions by the court to restore competition to the generic drug market.

The lawsuit is the second stemming from a multi-state investigation led by the Connecticut Attorney General. The first lawsuit, which is still pending in US District Court for the Eastern District of Pennsylvania, was filed in December 2016.

With reporting from Patch correspondent Tom Davis