Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Generic drug companies charged with price fixing of digoxin and doxycycline drug products, (Mar 3, 2016)

By Linda O’Brien, J.D., LL.M.

Six generic drug manufacturers engaged in a conspiracy to artificially fix supracompetitive prices for their generic digoxin and doxycycline drug products, according to a complaint filed in the federal district court in Philadelphia (International Union of Operating Engineers Local 30 Benefits Fund v. Lannett Company, March 2, 2016).

International Union of Operating Engineers (IUOE) Local 30 Benefits Fund provides health care and retirement benefits to union members through not-for-profit trust funds.

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 generic doxycycline.

The complaint states that 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 absence of competitors in the marketplace also did not explain the price increases for generic digoxin and doxycycline. Furthermore, the abrupt increases in the price for generic digoxin and doxycycline had a catastrophic effect on consumers, the complaint alleges.

According to the complaint, the sudden and massive price increases represented a sharp departure from the previous years of low and stable prices, and itself is indicative of collusion. 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 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. However, publicly available data on the generic digoxin and doxycycline markets show that it is susceptible to cartelization by the defendant drug companies, the plaintiff charges. 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 complaint alleges.

The complaint also states that the defendants engaged in anticompetitive activities, including participating in meetings to discuss the price of generic digoxin and doxycycline, agreeing to charge prices at specific levels, and issuing price announcements and price quotations in accordance with the agreement. As a result of the defendants’ conspiracy, price competition for generic digoxin and doxycycline was allegedly restrained and the prices were fixed at artificially high and non-competitive levels.

The plaintiff asserts claims for unjust enrichment, unfair competition, and a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and various state antitrust and consumer protection 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-00990-CMR.

Attorneys: Brent W. Landau, Michael P. Lehmann, and Michael D. Hausfeld (Hausfeld LLP) and Frank R. Schirripa (Hach Rose Schirripa & Cheverie LLP) for International Union of Operating Engineers Local 30 Benefits Fund.

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

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