Antitrust Law Daily FTC alleges Martin Shkreli’s company engaged in scheme to maintain monopoly of life-saving drug
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Monday, January 27, 2020

FTC alleges Martin Shkreli’s company engaged in scheme to maintain monopoly of life-saving drug

By Jody Coultas, J.D.

Vyera Pharmaceuticals allegedly restrained trade through restrictive distribution agreements in order to maintain their monopoly of the drug Daraprim. Federal court complaint filed by FTC and New York AG.

The FTC and New York State Office of the Attorney General have filed a complaint in the federal district court in New York City alleging that Vyera Pharmaceuticals, LLC engaged in an elaborate anticompetitive scheme to preserve a monopoly for the drug Daraprim. Martin Shkreli, the "Pharma Bro" known for sharply increasing the prices of drugs acquired by his companies that is currently serving time in prison for fraud, and another former executive were also charged, according to today’s FTC announcement (In the Matter of Vyera Pharmaceuticals, LLC, FTC File No. 161 0001; FTC v. Vyera Pharmaceuticals, LLC, Case No. 20-CV-00706).

Toxoplasmosis is a rare, potentially fatal parasitic infection. In most people, toxoplasmosis is easily contained by the immune system and causes no symptoms. However, for those with compromised immune systems—such as individuals with HIV/AIDS, cancer patients, or recipients of organ transplants—toxoplasmosis can lead to deadly infections of the brain and lungs. Daraprim is the "gold standard treatment" for toxoplasmosis.

The FTC alleges that Daraprim was an affordable, life-saving treatment for more than 60 years. However, when Vyera acquired the manufacturing license for Daraprim it immediately raised the list price from $17.50 to $750 per tablet. Knowing that the price increase would attract generic competition, the FTC alleges, Vyera illegally restrained trade through restrictive distribution agreements that ensured that would-be generic entrants could not buy samples of Daraprim. Generic manufacturers were thus unable to conduct the FDA-mandated bioequivalence tests necessary for obtaining approval. The defendants also prevented competitors from accessing a critical ingredient used to manufacture Daraprim, according to the FTC.

The press release also alleges that Vyera, parent company Phoenixus AG, and executives Shkreli and Kevin Mulleady, signed "data blocking" agreements preventing several distributors from selling Daraprim sales data to third-party data reporting companies. The agreements were allegedly used to keep potential generic competitors from accurately assessing the market as generic companies rely on this data to assess whether a given development project is worth pursuing.

As a result of the allegedly anticompetitive conduct, consumers have lost out on tens of millions of dollars in savings that would have resulted from purchasing generic versions of Daraprim, the FTC alleges. Currently, there is no generic version on the market today.

The complaint seeks equitable monetary relief to provide redress to purchasers who have overpaid for the drug. The complaint also seeks remedial injunctive relief to restore competitive conditions to the market, halt any ongoing anticompetitive conduct, and prevent the defendants from engaging in similar conduct in the future.

Concurring commissioner statements. Commissioners Rebecca Kelly Slaughter and Rohit Chopra wrote concurring statements arguing that the FTC should have included FTC Act violations based on Vyera’s allegedly unfair and deceptive practices. "Where we see new patterns of problematic behavior in the marketplace, such as the practice of raising prices on orphan drugs, we need to adapt our enforcement strategies to address them," Slaughter argued. Chopra said: "I continue to be concerned that the FTC does not use its authority to the fullest extent possible to combat marketplace abuses. This is another missed opportunity for the Commission."

New York AG statement. "Martin Shkreli and Vyera not only enriched themselves by despicably jacking up the price of this life-saving medication by 4,000 percent in a single day, but held this critical drug hostage from patients and competitors as they illegally sought to maintain their monopoly," said New York Attorney General James in announcing the joint action. "We filed this lawsuit to stop Vyera’s egregious conduct, make the company pay for its illegal scheming, and block Martin Shkreli from ever working in the pharmaceutical industry again."

Companies: Vyera Pharmaceuticals, LLC; Phoenixus AG

MainStory: TopStory Antitrust FederalTradeCommissionNews

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