Investigations Unfold Major Generic Drug Price-Inflation Conspiracies

The recent crackdown on generic drug price fixing has far-reaching implications, an investigation led by federal and state prosecutors has found. Mylan and Teva—2 major generic industry players—and 4 smaller pharmaceutical companies are facing heat for wide-ranging drug price inflation conspiracies. Officials claim this is reflective of broader, larger issues in the drug industry.

In December, the Department of Justice announced charges against top pharmaceutical executives, Heritage Pharmaceuticals’ Jeffrey Glazer and Jason Malek, for scheming to fix prices, rig bids, and allocate customers for certain generic drugs. The charges were filed as a part of a larger antitrust investigation into generic drug price fixing that sparked concerns over conspiracies among several companies, bringing to light anticompetitive price-fixing schemes such as inflating costs for certain drugs and divvying up customers.

Twenty states filed a civil complaint against several of these drug companies, including Mylan and Teva, for intentionally raising the costs of the doxycycline hyclate (also known as Doxy DR), a delayed-release antibiotic, and glyburide, a diabetes medication. Generics, the average prices of which are typically 20% or less of the brand price, are known for saving consumers and the health care system billions of dollars because they introduce competition into markets that previously had none. The complaint, filed on December 14, 2016, stated that “prices for generic drugs have uncharacteristically risen—some have skyrocketed—for no apparent reason, sparking outrage from public officials, payers, and consumers across the country whose costs have doubled, tripled, or, in some cases, increased up to 1000% more.”

Doxy DR’s price, for instance, skyrocketed from $20 in 2013 to $1849 in 2014, according to a congressional report that compares drug price increases. A 2014 National Community Pharmacists Association survey of 1000 members found that more than 75% of pharmacists reported inflated prices on more than 25 generic drugs, with some of these prices having spiked 600% to 2000%.

The complaint discusses the cozy circumstances of the industry, such as frequent conferences, trade shows, and industry dinners which allow drug makers to meet, discuss business, and devise conspiracies with their competitors. According to the suit, Heritage and the other defendants intentionally formed alleged agreements with competitors to allocate market share, maintain high prices, and avoid competition. The companies maintained the appearance of market competition that did not actually exist.

State attorneys are accusing Heritage and Mylan executives of communicating with the intention of dividing the market for Doxy DR to increase profits. An agreement settled on refraining from competition over Doxy DR through allocation of market shares. Teva is also being named for colluding with several smaller companies, such as Aurobindo and Citron, on agreements to hike prices for glyburide, the diabetes generic medication.

Although the investigation has identified several companies already, officials suggest that the case has implications on an even broader scale. More findings based on ongoing investigations on federal and state levels are expected to unravel over the next year, exposing unexplained generic drug price increases linked to many more drugs and companies.