Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Drug companies allegedly conspired to fix prices for generic digoxin, doxycycline, (Apr 6, 2016)

By Linda O’Brien, J.D., LL.M.

Six generic drug manufacturers engaged in a conspiracy to artificially fix the prices for their generic digoxin and doxycycline drug products, according to a complaint filed in the federal district court in Philadelphia (Pipe Trade Services MN v. Lannett Company, Inc., April 4, 2016).

Pipe Trade Services MN is an employee welfare benefit plan that provides health benefits, including prescription drug benefits, to active plan participants and retirees of the pipe trades.

Derived from the leaves of a digitalis plant, digoxin is used to treat mild-to-moderate heart failure in adults, increase heart contracting functions in pediatric patients with heart failure, and control resting heart rate in adults with chronic atrial fibrillation. Doxycycline monohydrate is an antibiotic used in treating humans and animals.

Lannett Company, Impax Laboratories, West-Ward Pharmaceuticals, Mylan Pharmaceuticals, and Par Pharmaceuticals manufacture and distribute generic digoxin. Lannett, West-Ward, the Actavis unit of Allergan plc, Mylan, and Par manufacture or supply generic doxycycline.

The purpose of allowing a generic drug industry in the United States was to encourage the manufacture of less expensive, non-branded substitutes for branded prescription drugs that either had no patent exclusivity or for which the patent exclusivity was expiring, the complaint states. Because the healthcare system in the United States is focused on cost saving, there is an increasing demand for cheaper generic drugs. On average, the retail price of a generic drug is 75 percent lower than the retail price of a brand name drug.

According to the complaint, the price for generic digoxin was remarkably stable from 2005 until October 2013, at which time the price increased dramatically. The price increases were caused by abrupt and sudden pricing changes by Lannett, West-Ward, and Impax. Par and Mylan followed those changes when the companies entered the market in 2014 and 2015, respectively. In November and December 2013, the price for .125 mg and .250 mg tablets of digoxin increased more than 750 percent. Data from the National Average Drug Acquisition Cost (NADAC) on generic digoxin show price increases that led to identical prices for Lannett’s, West-Ward’s, and Impax’s generic digoxin products. The NADAC data for 100 mg generic doxycycline hyclate tables manufactured by Allergan and West-Wart showed a similar pattern.

There was no reasonable justification for an abrupt shift in pricing conduct by the drug companies, according to the plaintiff. The sudden and massive price increases represented a sharp departure from the previous years of low and stable prices. The unseemly profits earned by the generic drug manufacturers led to inquiries by Congress and to Senate hearings. Additionally, in 2014 the U.S. Department of Justice and Connecticut Attorney General began investigations into whether a conspiracy took place to increase the prices of generic digoxin and doxycycline.

The complaint also alleges that publicly available data on the generic digoxin and doxycycline markets show that it is susceptible to cartelization by the defendant drug companies. The factors include (1) a high degree of industry concentration; (2) significant barriers to entry; (3) inelastic demand; (4) lack of available substitutes; (5) a standardized product with a high degree of interchangeability; (6) absence of a competitive fringe of sellers; and (7) communications between competitors.

The plaintiff asserts claims for unjust enrichment and a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and various state antitrust laws. The action seeks declaratory and injunctive relief, treble damages, restitution, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-01534-CMR.

Attorneys: Anthony J. Bolognese (Bolognese & Associates, LLC), Heidi M. Silton (Lockridge Grindal Nauen P.L.L.P.), Gary F. Lynch (Carlson Lynch Ltd.), Jeffrey L. Kodroff (Spector Roseman Kodroff & Willis P.C.) for Pipe Trade Services MN.

Companies: Lannett Company, Inc.; Impax Laboratories, Inc.; West-Ward Pharmaceuticals Corporation; Allergan plc; Mylan Pharmaceuticals, Inc.; Par Pharmaceuticals Companies, Inc.

News: Antitrust PennsylvaniaNews