Four Route 1 corridor companies are among 20 generic drug companies being sued by the state of New Jersey and other states for allegedly conspiring to illegally fix the prices of hundreds of products, raising the price of some drugs to more than 10 times their true cost, all at a cost of billions to consumers.
The suit names Sandoz, headquartered on College Road West in Princeton; Aurobindo on Windsor Center Drive in Hightstown; Dr. Reddy at College Road East in Princeton; and Zydus Pharmaceuticals on Route 31 in Pennington. It also names Israel-based Teva, which merged with Ewing-based Microdose in 2013 and Actavis, which has a North Brunswick location, in 2016.
Individual executives named in the suit include James Grauso, former senior vice president of commercial operations for Aurobindo; Armando Kellum, former vice president of contracting and business analytics at Sandoz; Kevin Green, former director of national accounts at Teva and current vice president of sales at Zydus Pharmaceuticals; and several other Teva and Actavis executives.
The lawsuit targets corporate leaders 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 suit.
“We all know that prescription drugs can be expensive. Now we know that high drug prices have been driven in part by an illegal conspiracy among generic drug companies to inflate their prices,” said New Jersey Attorney General Gurbir Grewal in a prepared statement.
“It is particularly troubling that so much of this unlawful conduct took place in New Jersey. I’ve said before and I’ll say again that New Jersey’s pharmaceutical industry is the envy of the world. But no New Jersey company will get a free pass when it violates the law and harms our residents just because it is located here.”
The complaint alleges that price-fixing by the defendants has 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.
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 complaint alleges that the collusive activity peaked between July, 2013, and January, 2015, when one of the participants in the alleged 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.”
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. 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 were said to frequently use coded terms like “playing nice in the sandbox” and “responsible competitor” to describe their anti-competitive efforts and to reference the industry’s ingrained 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.
Much of the anti-competitive conduct allegedly occurred in New Jersey, where many of the defendants are based. For example, the complaint identifies a January, 2014, “industry dinner” at a steakhouse in Bridgewater, which was attended by at least 13 high-ranking executives from more than five companies.
The complaint alleges violations of the Sherman Act, a federal antitrust law, as well as violations of numerous state laws, including New Jersey’s Antitrust Act and Consumer Fraud Act.
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 U.S. District Court for the Eastern District of Pennsylvania, was filed in December, 2016. New Jersey joined that action, which now includes 18 corporate defendants, two individual defendants and 15 generic drugs, in early 2017.