Teva Price Fixing Scheme
Connecticut Attorney General William Tong calls it “the largest cartel case in the history of the United States.” According to a recent legal briefing, 44 states are suing 20 generic pharmaceutical makers for price fixing. The lawsuit also names 15 executives from various companies including Mylan, Sandoz (Novartis), Heritage and Pfizer. However, the company featured most prominently in the 524-page complaint is Teva.
Maureen Cavanaugh, former Senior VP and Chief Commercial Officer for Teva North America is one of those named in the suit. Teva says it “continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability,” according to a spokeswoman. Three lower-level executives who are no longer Teva employees are also named in what the spokeswoman says are just “allegations” the company will continue defending itself against.
There is an aspect of this entire scandal that smells like a conspiracy. According to the lawsuit, executives would meet at “industry dinners, cocktail parties and outings” where they would agree to gouging prices. Their plans were followed up with phone calls and text messages. The complaint alleges the companies “divvied up markets” and each of the named defendants “willingly participated” and “reaped substantial monetary rewards.”
Sandoz claims the charges are “without merit and will vigorously contest them.” Pfizer says they do “not believe the company or our colleagues participated in unlawful conduct” and promises to “vigorously defend against these claims.”
Analyst for Wells Fargo, David Maris, says “penalties and damages are impossible to calculate, but could be material.” Maris says his tea has learned that Tong’s office is “preparing for trial.
The investigation into this price-fixing scam has taken the better part of five years to complete. The suit states that some of the price hikes are the result of backroom conversations. The 44 states have identified 100-300 prescription meds they believe were affected including treatments for multiple sclerosis, HIV, ADHD, and cancer.
The drugmakers thwarted billions of dollars in savings and rerouted these dollars into company profits. Tong’s office says this case could get even bigger.
It’s the second lawsuit filed by the Connecticut Attorney General. Tong’s predecessor, George Jepsen, launched an investigation into the generic price in 2014. By 2016, dozens of states filed similar suits. At that time, Jepsen called the “tip of the iceberg.”
In 2017, the states amended their complaint and targeted companies and individuals. Among those individuals named were Mylan president Rajiv Malik and Emcure CEO Satish Mehta. Mylan’s 2017 statement reaffirm the company’s “deep faith” in Malik as a leader and pledged to “stand[s] behind him fully.” Like Teva, Mylan is conducting its own internal investigation and has assured the public they’ve come up empty on price fixing information.
“Mylan and Rajiv Malik both intend to defend this case vigorously, and we look forward to the opportunity to present a full defense,” the company said. The U.S. Department of Justice is also investigating whether or not Mylan and the others colluding in a price-fixing scheme.
Credit Suisse analyst Vamil Divan, M.D. wrote in an investor’s note that if Teva settles, the company’s profit margins would not suffer and the financial burden would be minimal. “While it is hard to quantify what Teva’s potential liability could be at this point, we believe any potential settlement would be manageable for Teva and take into consideration the important role generic drugs play in managing drug spending in this country, as well as Teva’s current debt load.”
The lawsuit claims the companies were aware of their illegal conduct and that those named employees and executives took “overt and calculated steps” to destroy any evidence of collusion in emails, texts or in any other written form.
After the suit was announced last Friday, Teva saw its stocks plunge by 20%. The company is now down by 40% from this time last year. The prices on the affected drugs were hiked as much as 1000%, according to the 524-page filing.
So What does this mean for consumers and when will you see prices decline?
This isn’t as easy to answer as the who, what, where and why’s of the lawsuit. The reason for this is gridlock in Washington. Prescription drug costs are now a political issue as much as a pocketbook issue and with a divided government. Furthermore, it is unlikely this cost issue will be resolved before the next election in 2020.
Despite President Trump’s claims in the 2019 State of the Union that prescription drug costs were decreasing, the reality is that prices are increasing, albeit at a slower pace in years prior. It is more likely that this slower pace is the result of the price-fixing investigation which began in 2014, as mentioned earlier.
Today, Congress will vote of three bipartisan bills to lessen the financial burden for individuals and families who have been suffering, as a result, high prescription costs. The Democrat-controlled House of Representatives attributes their sweeping 2018 win to plans to improve healthcare access and drug costs. The new bills are tied to provisions in the Affordable Care Act that House Republicans are expected to reject, according to Politico.
The White House has not released a plan to reduce medication costs and President Trump said earlier this year, he will roll out a plan in 2021, if he wins a second term.
It is likely the solution to this problem will not be the result of lawsuits nor will it be solved by elected officials. It may come from the private sectors and from companies like Blink Health.
Blink Health is the brainchild of internet entrepreneurs in downtown Manhattan. Their goal is to “revolutionize” how Americans purchase their medications by doing something they already do: letting customers shop for the best deals they can find. This model is similar to online shopping.
Say you find a car seat for a newborn at a baby retail store for $139, but your budget is $100 before taxes. You hear stores like Walmart and Target carry the same model in the same color for under $139, but over $100. These are reasonable discounts, but your goal is to stick to your budget. So, a friend tells you to check Amazon. You do and find the product for $97.36 with free shipping. Of course, you will buy from Amazon. Blink Health thinks consumers should be able to do the same with their prescription drugs.
Perhaps the solution is easier than we think but requires the one thing the pharmaceutical companies, elected officials and startups are unwilling to do: collaborate.
If prescription drug prices are to go down permanently and be immune to schemes and lawsuits like this one out of Connecticut, there needs to be a set of laws with heavy fines and jail time for those who scheme to fix prices, pharmaceutical companies need to be more amenable to accepting lower costs from insurance companies, and both need to expand the market so that startups like Blink Health can offer consumer price shopping for both generic and brand name medications. Without this kind of cooperation, it is unlikely patients will see improvements.
We will keep you updated as this case proceeds.
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About the Author: Aisha K. Staggers is a writer, lecturer, political analyst and literary agent. She appears almost weekly for “Staggers State of Things” on the Dr. Vibe Show. Her work has been published by Paper Magazine, AfroPunk, The Spool, GREY Journal, MTV News, HuffPost, Blavity, Atlanta Blackstar, For Harriet, New York Review of Books and a host of other first-run publications and syndicated outlets. Find her on Twitter @AishaStaggers. For more of her work, check out her page here!
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