Lawsuit alleging price-fixing of generic drugs points to Minnesota

A pharmaceutical saleswoman in Minnesota was a key figure in a conspiracy by six generic drug manufacturers to curtail competition and raise prices, according to a lawsuit filed Thursday by the attorney generals of Minnesota and 19 other states.

The complaint says executives and salespeople for the companies arranged "Girls Night Out" and "Women in the Industry" meetings or dinners, which ultimately led to agreements to raise prices of the generic drug Glyburide for diabetes and the antibiotic Doxycycline Hyclate for infections.

The local saleswoman, who worked for Heritage Pharmaceuticals, "is central to the allegations," said Minnesota Attorney General Lori Swanson. "She organized dinners and meetings among employees and competitors that led to further agreements to set prices and allocate markets so they could avoid competing on price."

The lawsuit comes amid rising evidence and concern over the cost of generic and common prescription medications. A 400 percent increase in the typical cost of the EpiPen - an injectable emergency medication for allergies - caused an uproar this year, followed by reports showing that numerous drugs have grown more expensive.

Prescription drug spending in the United States rose from $367 billion in 2012 to $457 billion last year, according to federal estimates, which linked 30 percent of that increase to price changes. The average price of generic hydroxychloroquine sulfate for the treatment of arthritis and lupus, for example, rose 372 percent from 2014 to 2015, federal Medicare data shows.

Price-fixing by generic manufacturers would be a particularly bitter pill for Minnesota insurance and health reform leaders, who redesigned public and private health plans over the past decade to steer patients toward cheaper generic drugs and away from brand names.

Minnesota's Medical Assistance program, for example, adopted a policy requiring pharmacists to substitute equivalent generic drugs for brand name versions unless told not to by the prescribing doctors or patients. The Generic Pharmaceutical Association, representing manufacturers, estimates the program saved $473 million last year alone through the use of generic drugs over brand-name versions.

Generic drugs have offered a "tremendous value" to the state, said Emily Piper, commissioner of the Minnesota Department of Human Services, which operates the MA program. On the other hand, Piper called it a "significant concern" that 85 drugs covered by MA have increased in price by more than 500 percent in the last five years. She offered support to Swanson's lawsuit and congressional efforts to make generic drug pricing more transparent.

The savings from generic drugs are real, said Stephen Schondelmeyer, director of the PRIME Institute at the University of Minnesota, which analyzes economic trends in the prescription market. But lately, fewer costly brand names have come off their patents, he said, and generic manufacturers have taken to artificially increasing their prices instead to increase their revenue.

"They're simply grabbing the cash and running," he said. "They'll keep running all the way to the bank and do it as long as we let them."

The attorneys general allege that the six companies colluded to increase prices by deciding which companies would make serious bids for certain contracts and which would not, and by sharing information and collectively deciding to raise their prices at the same time.

"It isn't competition when people in the same industry get together and say, 'You take this customer, I'll take that customer,'" Swanson said. The two drugs in the lawsuit are just a starting point and more might come up in litigation, she added.

The lawsuit followed a two-year investigation by authorities in Connecticut. Redacted from the complaint were pieces of evidence such as texts and e-mails that showed alleged collusion among the six companies: Aurobindo, Citron, Heritage, Mayne, Mylan and Teva.

The redactions were necessary, Swanson said, because the states expect a fight from the drugmakers, who might claim that the texts and e-mails were sensitive trade information that shouldn't have been publicly disclosed.

A spokeswoman from Heritage declined to answer questions from the Star Tribune Thursday.

The complaint doesn't identify the Minnesota saleswoman, but it does mention former Heritage executives Jeffrey Glazer and Jason Malek, whom the company fired in August and sued for allegedly stealing millions of dollars through "an elaborate embezzlement and self-dealing scheme," according to a statement previously issued by the company.

Federal felony charges also were filed Wednesday against those executives in connection to alleged price-fixing.

The lawsuit is likely to intensify political action regarding drug prices. Sen. Amy Klobuchar, D-Minn., proposed legislation last year to give the U.S. Centers for Medicare and Medicaid Services more negotiating authority over the prices of drugs provided to senior citizens through Medicare Part D plans.

Earlier this week, she released a statement regarding the federal criminal charges of the Heritage executives, noting that the price of doxycycline recently increased 8,000 percent from $20 for 500 tablets to $1,849.

"Price fixing rigs the system against Americans struggling to pay rising prescription drug costs," Klobuchar said.

President-elect Donald Trump also appears ready to take on the issue, recently telling Time magazine, "I'm going to bring down drug prices."

Locally, health plans still believe in the savings of generic drugs, but have been trying to get ahead of the problem by switching those with inflated prices to restrictive formularies, said Jim Schowalter, president of the Minnesota Council of Health Plans.

"Increasing generic use is still the right approach," he said, "but it's about using the right generics and being able to change quickly."