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Price-Fixing, Fraud and Collusion, CT Attorney General Offers Sobering View of Generic Drug Market

November 05, 2019
by Colin Poitras

Connecticut Attorney General William Tong gave faculty and students a rare glimpse into the highly profitable prescription drug market when he shared his findings of a multi-year investigation into the generic drug industry during a presentation at the Yale School of Public Health.

As part of a Dean’s Lecture and the Yale School of Medicine’s Health and Policy Management Seminar on November 1, Tong described an elaborate network of alleged price-fixing and market share collusion between some of the nation’s leading generic drug manufactures. The allegations form the basis of two national antitrust lawsuits filed by his office and supported by a coalition of attorneys general in 49 states.

Connecticut began investigating generic drug pricing in 2014 after prices soared for common generic medications, in some cases by as much as 1,000 percent. Investigators gathered almost 19 million internal documents from major generic drug companies in response to multiple subpoenas, including detailed phone records, emails and text messages.

The contents were shocking, Tong said. Calls between executives of different generic drug companies appeared to spike on days drug prices were raised or in the days leading up to a major price increase. Even more remarkably, Tong said, investigators found a detailed spreadsheet created by one employee that appeared to contain information related to price-fixing and dividing up market shares. It was the proverbial smoking gun.

“What we uncovered was a multi-billion-dollar fraud and multi-year conspiracy to fix prices and allocate market share for hundreds of generic drugs that we depend on to live every day,” Tong said. “What we discovered is that the generic drug industry, without exaggeration, is the largest corporate cartel in history.”

“And we use that language very purposefully,” Tong continued, speaking to a packed crowd in Winslow auditorium. “(These pharmaceutical companies) run a cartel like OPEC does, like the major illicit drug cartels do. They meet. They talk. They divide up their customers. They set prices. And all of that is extraordinary illegal.”

Corporate defendants in the two lawsuits include some of the largest pharmaceutical manufacturers in the world—Heritage Pharmaceuticals Inc., Teva Pharmaceutical Industries Ltd., Pfizer Inc., Mylan Pharmaceuticals Inc. and Sandoz Inc. Tong said the antitrust violations are particularly egregious because they affected drugs people rely on for acute and chronic conditions such as diabetes, cancer, epilepsy, multiple sclerosis, HIV, ADHD and more.

What we discovered is that the generic drug industry, without exaggeration, is the largest corporate cartel in history.

William Tong

“The real problem, of course, is the impact these prices have on our health insurance, Medicare, Medicaid and people who don’t have prescription drug coverage and have to pay out of pocket,” Tong said. “People are being put in a position where they have to choose between eating, housing, taking care of their families and getting the drugs they need to live. We’re not talking about marginal drugs for rare diseases or so-called orphan drugs either. We’re talking about everyday drugs.”

Some examples of price increases Tong provided:

  • Doxycycline (a common antibiotic used to treat bacterial infections such as acne, gum disease and urinary tract infections) 2013 price: $20. 2014 price: $1,800 (an 8,281% increase)
  • Albuterol sulfate (a common bronchodilator used to treat asthma and other breathing conditions) 2013 price: $11. 2014 price: $434 (a 4,000% increase)
  • Pravastatin (a common medication used to reduce levels of “bad” cholesterol and triglycerides in the blood) 2013 price: $27. 2014 price: $196. (a 500% increase)

“The answer as to why our prescription drugs are so high, in the generic space at least, is because the market in large part is rigged and prices are fixed,” Tong said. “With these lawsuits, we hope to dismantle the system and claw back billions of dollars that have been stolen from all of us and the American people.”

Students attending Friday’s lecture described it as a cautionary tale.

“When we see the private industry colluding together to increase their profits, it becomes a large driver for public health professionals to be on the lookout for private industries that are taking advantage of the public,” Claudia Debruyn, MPH ’21, told the Yale Daily News.

Submitted by Sayuri Gavaskar on November 05, 2019