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Probe Into Generic Drug Price Fixing Set To Widen

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Heard on Morning Edition

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Forty-five states and the Department of Justice are claiming that generic-drug prices are fixed and the alleged collusion may have cost U.S. business and consumers more than $1 billion.

In their complaint , prosecutors say that when pharmacies asked drugmakers for their lowest price, the manufacturers would rig the bidding process.

"The companies would work out in advance who would get the lowest price and then the other competitors may put in what we would call a cover bid," says Michael Cole, who heads the antitrust department at the Connecticut attorney general's office. (Such bids give the appearance of competitive bidding.)

Through subpoenas, Cole's team has assembled millions of texts, emails and phone calls between 2012 and 2015. The prosecutors say the records show executives divvying up customers, setting prices and giving the illusion that generic pharmaceuticals were transacted in an open and fair marketplace.

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Because of this price-fixing scheme, prosecutors say, health insurance premiums and copays increased. They also say tax-funded programs like Medicare and Medicaid overspent on drugs.

So far, two executives from Heritage Pharmaceuticals have pleaded guilty to antitrust crimes. Both are now feeding information to prosecutors who say the two rigged prices on, among other drugs, the common antibiotic doxycycline, which shot the price up 8,000 percent .

"To the extent that taxpayers have had to pay that bill, I think that the taxpayers should recover. And we will get involved on the civil side and recover damages for the U.S. government," Makan Delrahim, head of the Department of Justice's antitrust division, said at a seminar.

The fact that the Department of Justice is involved has caught the attention of class-action lawyers.

Jason Dubner, an attorney for Butler, Rubin, Saltarelli Boyd, says the allegations are so massive that prices throughout the generic industry could have been affected. "You start to get an understanding just how widespread this alleged conspiracy was to cover so many different types of cures," he says.

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