A pharmaceutical company with a manufacturing plant in Seymour recently was named one of 20 defendants in a price-fixing lawsuit brought by more than 40 states.
Lannett Co. Inc. was named a defendant in the lawsuit filed in the U.S. District Court of Connecticut.
Indiana Attorney General Curtis Hill entered Indiana in the lawsuit in an announcement Sunday.
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Connecticut Attorney General William Tong said in a prepared statement release Friday that there is hard evidence that shows the generic drug industry perpetrated a multibillion-dollar fraud on the American people.
“We all wonder why our health care, and specifically the prices for generic prescription drugs, are so expensive in this country. This is a big reason why,” he said.
In addition to the states, the Justice Department’s antitrust division is conducting a criminal investigation. The unit’s chief said last week that charges would be filed without specifying timing.
Lannett, a Philadelphia-based company, develops, manufactures and distributes generic pharmaceuticals at a 381,000-square-foot manufacturing plant on a 4.19-acre site at 1101 W. C Ave. in the Freeman Field Industrial Park.
The company is the fourth-largest industrial employer in Jackson County with 706 employees in the first quarter of 2019, according to Jackson County Industrial Development Corp.
The 500-page complaint alleges that Lannett, Teva, Sandoz, Mylan, Pfizer and 15 other generic drug manufacturers engaged in a broad, coordinated and systematic campaign to conspire with each other to fix prices, allocate markets and rig bids for more than 100 different generic drugs, according to a news release from Hill’s office.
The lawsuit also names 15 individual senior executive defendants at the heart of the conspiracy who were responsible for sales, marketing, pricing and operations.
Lannett’s director of national accounts, Tracy Sullivan DiValerio, was named as one of the 15 individual defendants. DiValerio is not based at the Seymour plant.
A company spokesperson could not be reached for comment and did not return phone calls requesting more information.
The drugs at issue account for billions of dollars of sales in the United States, and the schemes increased prices affecting the health insurance market, taxpayer-funded health care programs such as Medicare and Medicaid and individuals who must pay artificially inflated prices for their prescription drugs, the lawsuit contends.
“This lawsuit should serve as a warning to any company that intentionally defies the trust of their customers,” Hill said. “The rising cost of health care is daunting enough without price fixing of medications. Americans deserve options when they shop for these products. Any pharmaceutical company that engages in price-fixing and artificial cost inflation is part of the problem that ails health care in the United States. Here in Indiana, we will keep working to protect all Hoosier consumers from illegal schemes.”
The drugs span all types, including tablets, capsules, suspensions, creams, gels, ointments and classes, including statins, ace inhibitors, beta blockers, antibiotics, anti-depressants, contraceptives and non-steroidal anti-inflammatory drugs, and treat a range of diseases and conditions, from basic infections to diabetes, cancer, epilepsy, multiple sclerosis, HIV, ADHD and more.
In some instances, the coordinated price increases were more than 1,000 percent, according to Hill’s news release.
The complaint lays out an interconnected web of industry executives participating in these activities. Competitors met with each other during industry dinners, “girls nights out,” lunches, cocktail parties and golf outings. Court documents list communications via telephone calls, emails and text messages between those named in the complaint.
Throughout the complaint, attorneys wrote defendants would use terms such as “fair share,” “playing nice in the sandbox” and “responsible competitor” which Hill said shows how they would discourage competition, raise prices and collude.
The lawsuit seeks damages, civil penalties and actions by the court to restore competition to the generic drug market.
Potential fines could exceed $2 billion, given that generic drug firms were churning out higher profits during the time in question, said Steven Tepper, an analyst at Israel Brokerage and Investments. That strikes a blow to a company already struggling to pay back $29 billion of debt — a sum almost twice its market value.
“To take this in proportion, that’s about a year’s worth of free cash flow that will have to be thrown out instead of used to reduce the debt,” Tepper said. “The companies will most likely drag this lawsuit out for a number of years, and Teva could be in much better shape then than it is in today. But a major fine is still not a nice situation.”
The complaint is the second to be filed in an ongoing, expanding investigation into the pharmaceutical industry.
The first complaint, still pending in U.S. District Court in the Eastern District of Pennsylvania, was filed in 2016 and now includes 18 corporate defendants, two individual defendants and 15 generic drugs. Two former executives from Heritage Pharmaceuticals, Jeffery Glazer and Jason Malek, have entered into settlement agreements and are cooperating with the attorneys general working group in that case.
Lannett purchased Kremers Urban Pharmaceuticals for $1.23 billion on Nov. 27, 2015. The company announced an immediate 10 percent reduction in workforce as a result of the purchase and a 20 percent reduction between then and 2019.
The reductions were part of a restructuring process to streamline operations after closing Kremers Urban corporate offices in Princeton, New Jersey.