MORGANTOWN, W.Va. — The previously redacted complaint in a May multistate federal civil suit alleging Teva, Mylan and other generic drug makers conspired to raise prices and divvy up market share has been unsealed, giving a behind-the scenes look at the communications behind the allegations.
Defendant Konstantin Ostaficiuk, president of Camber Pharmaceuticals, said in an email after a multi-company country club outing: “This is a crazy biz but I am grateful to have friends like all of you!!! Happy and honored to have you all as ‘fraternity brothers.”
In 2012, Mylan and Sandoz, after negotiations, released a blood pressure medication on the same day with market share and price already set. One Sandoz official said, “Sometimes a little help from our competition is welcome as well.” Another said, “I guess this is what they call ‘co-opetition.’”
West Virginia is among the 43 states, along with Puerto Rico, pursuing the case in the U.S. District Court for the Eastern District of Pennsylvania, where dozens of similar suits are progressing — one of which was previously unsealed.
It names 20 companies, including Mylan, and 14 individual executives, including Mylan’s Vice President of Sales Jim Nesta, as defendants. Israel-based Teva is the primary defendant.
This suit alleges that Teva led its alleged co-conspirators, in what it calls one of the most egregious and damaging price-fixing conspiracies in the history of the United States, by selecting a core group of “High Quality” competitors with which it already had “very profitable collusive relationships” and targeted drugs where they overlapped “to lead and follow each other’s price increases.”
The suit is 510 pages and goes into great detail about the various companies’ alleged collusion on various drugs. Here we offer a representative sampling of the now-unredacted material.
The companies used such phrases as “rules of engagement,” “fair share,” “responsible” and “playing nice in the sandbox” to describe their philosophy and methods.
Defendant Taro Pharmaceuticals created a chart to illustrate its view of fair share depending on the number of entries into the market: two companies, 60-40; three, 45-35-20; and so on. Not that it always fell that way. “Defendant Ara Aprahamian, a Taro executive, wrote in a training document, “Giving up share to the new entrant shows responsibility and will save us in the long run. … Don’t the boat – greedy hogs go to the slaughter.”
Teva in turn said, “We should probably discuss how we want to handle all Taro increase items. Taro is a high quality competitor – I think we need to be responsible where we have adequate market share.”
Sometimes wholesalers and retailers were in on the unspoken market sharing. One wholesaler solicited a “priority wish list” from Teva, noting 7 other firms already had. The companies “are hoping to be able to horse trade without having to do ROFR [right of first refusal].”
Sometimes the retailers were not in the loop. When Sandoz and Mylan were engaging in some give and take over some market share, an official ordered his account executive to decline bidding for share at Walgreens, fearing “blowback” from Mylan. He ordered the executive to lie to Walgreens: “Trying to be responsible in the sandbox. I recommend you blame supply.”
A now-unredacted chart shows how prices soared during 2012-2013, the peak years of the alleged collusion, before states began probing the issue. In 2010, 3,820 drugs saw price hikes, with 125 jumping more than 100% and 260 more than 50%. In 2014, 4,461 drugs saw hikes, with 637 jumping more than 100% and 1,521 more than 50%.
In one instance, Teva and Mylan spatted over market share and price of Clonidine, a blood pressure medicine. Before the spat, Teva’s price for one version was $54.41. Mylan retaliation dropped it to $26.51. Negotiations drove it up to $80.76.
One method of allotting share was for one company to either not bid for sales to a retailer, or offer an unreasonably high bid knowing the retailer would reject it. In the Clonidine case, a Teva official wrote, Teva “was trying to concede the Clonidine business at CVS” to Mylan, in order to keep the price high for both companies.
Whie it may have been a fraternity, it wasn’t always chummy. When Greenstone tried to enter the Walmart market for an arthritis pain reliever, Teva’s vice president for sales David Rekenthaler wrote, “Great. More idiots in the market. … They should not have gone for Walmart. Poor strategy on their part.”
An unnamed executive wrote to him, “I thought they were done after Cardinal. I am pissed.”
When defendant Nisha Patel came to Teva as marketing and accounts director in 2013, she developed Teva’s competitor quality list, sorting each company by how well it played in the sandbox. Myaln was at the top of its list.
She also developed a chart of planned price increases for certain drugs – the first of several phases of planned hikes. In this first round, some prices would rise only 25%, but others would soar as high as 1,800%.
Teva was previously known for being slow to follow the price-hike bandwagon and Patel sought to change that culture. She wrote, “Price increases tend to stick and markets settle quickly when suppliers increase within a short time frame.”
The suit alleges that the companies tried to avoid putting any evidence of collusion in writing, preferring to negotiate in person at industry events, or by phone or text message. Patel would regularly refer to the results of her negotiations in her emails as “rumors” that reached her.
In 2013, the national media took notice that many generic drug prices were soaring, and Sandoz lied to Bloomberg about its role. Sandoz referred to one drug that it had raised the price on for three different dosages, with the prices climbing 1,778%, 2,325% and 2,778% respectively.
Having raised the prices in conjunction and cooperation with other drug makers, Sandoz told Bloomberg it had followed the lead of Mylan and Taro, after learning about their price hikes from subscription price service databases.
Following the order to unseal the redacted complaint, state Attorney General Patrick Morrisey celebrated the move in a news release: “The unredacted complaint allows the public to see in shocking detail the degree to which we allege the defendants sought to reduce competition to the detriment of West Virginia patients.”
Tweet David Beard @dbeardtdp or email dbeard@dominionpost.com
