Antitrust Law Daily States permitted to allege ‘overarching conspiracy’ in generic pharmaceutical industry
Wednesday, June 6, 2018

States permitted to allege ‘overarching conspiracy’ in generic pharmaceutical industry

By Nicole D. Prysby, J.D.

The federal district court in Philadelphia granted a motion by the attorneys general of 44 states, the District of Columbia, and the Commonwealth of Puerto Rico to file a consolidated amended complaint (CAC), alleging an "overarching conspiracy to ‘minimize if not thwart competition across the generic drug industry’" as to 15 drugs. The states had asserted claims as to glyburide, an oral diabetes medication, and doxycycline hyclate delayed release, an antibiotic. The court was not swayed by the defendants’ assertions that the amendment would be futile, because the CAC failed to allege an overarching conspiracy, and would prejudice the efendants, because of the burden of discovery and potential scope of liability such an overarching claim could portend. Although the Class Plaintiffs in the multidistrict litigation (MDL) opted to proceed on a pharmaceutical-by-pharmaceutical basis, the states were not bound by that decision. Direct action plaintiffs had alleged an overarching conspiracy. The court also granted the states’ request to create a separate track for their claims (In re Generic Pharmaceuticals Pricing Antitrust Litigation, June 5, 2018, Rufe, C.).

Background. The decision concerns MDL involving alleged price fixing of generic pharmaceuticals. The consolidated complaint included claims for violations of federal antitrust law and supplemental claims based on state law. The consumers alleged that the pharmaceutical manufacturers have conspired to inflate prices and reduce competition for 15 generic drugs, by communicating with each other to divide market share and allocate customers. There are a variety of plaintiffs in the MDL, including Class Plaintiffs and State Plaintiffs. The states moved for leave to file a CAC and for a separate government track in the MDL.

Motion to amend. The court noted that there was no dispute that the State Plaintiffs have not acted with undue delay, bad faith, or dilatory motives. The pharmaceutical manufacturers opposed the motion on the grounds that amendment would be futile because the State Plaintiffs failed to allege an overarching conspiracy and because it would be prejudicial.

With respect to futility, the pharmaceutical manufacturers argued that the State Plaintiffs failed to address the question of why a price increase on a particular drug would benefit the defendants that do not manufacture that drug. The State Plaintiffs argued that as more manufacturers market a particular generic drug, the price falls in relation to the branded drug, but at some point, the price dynamic changed for many generic drugs and the prices of dozens of generic drugs have risen, in some cases, dramatically. The proposed CAC alleges that the pharmaceutical manufacturers reached agreements for specific drugs and entered into agreements to allocate market share for those drugs. The CAC also alleges that the pharmaceutical manufacturers were coordinating more than one drug at a time, and thereby influencing the broader generic drug market. Given the allegations of a broader conspiracy, the court found that amending the complaint would not be futile.

As to prejudice, the court found that the pharmaceutical manufacturers failed to show they would be unfairly disadvantaged by allowing the CAC. They asserted that it would be prejudicial to allow discovery to proceed when they manufactured only one of the drugs in question; therefore discovery would be expensive. However, the court rejected that argument, because the discovery process could reveal relevant evidence to support the claims. And although the Class Plaintiffs decided to litigate on a pharmaceutical-by-pharmaceutical basis, the State Plaintiffs were not bound by that decision. In addition, some State Attorneys General could file the proposed CAC without leave, because they were not part of any previous complaint. Although the court recognized the need to control discovery, it should be allowed to proceed in this case.

The court also found that the State Plaintiffs’ request for a separate track in the MDL should be approved, in order to facilitate efficient management of the MDL.

The case is No. 2:17-cv-03768-CMR.

Attorneys: Antonia Carabillo Conti, Office of the Connecticut Attorney General, for the State of Connecticut. Elizabeth M. Lacombe (Duane Morris LLP) and Kim E. Rinehart (Wiggin & Dana LLP) for Aurobindo Pharma USA, Inc. Christine C. Levin (Dechert LLP) for Citron Pharma, LLC. Christopher Brett Leach (Gibson Dunn & Crutcher LLP) and James T. Shearin (Pullman & Comley) for Heritage Pharmaceuticals, Inc.

Companies: Aurobindo Pharma USA, Inc.; Citron Pharma, LLC; Heritage Pharmaceuticals, Inc.

MainStory: TopStory Antitrust PennsylvaniaNews

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