US courts hint at litigation against generic drug firms

Shares in several US generic drug manufacturers have fallen over the weekend, over revelations that the US Federal Government intends to pursue legal action against what it believes is price fixing in the industry. A top Department of Justice (DoJ) figure hinted that civil litigation may follow, if price gouging is suspected.

Mylan’s share price dropped as much as 3.1 percent after the comments, while Teva’s dropped 2.8 percent, and Endo International Plc’s dropped 5.6 percent to $6.92. The three manufacturers are among 12 major firms implicated in the affair.

A long-running investigation into the practices of large pharmaceutical companies in the generic drugs market is nearing its conclusion, after Federal prosecutors noticed ‘suspicious’ price hikes in several generic drug markets. US consumers pay an average of 17% more than people in Europe for the same drugs as a result of the way pricing is negotiated between insurance companies and manufacturers rather than with the central government. Ordinary consumers and taxpayers are footing most of the bill, whether through taxes that go to Medicare, or through their insurance premiums.

If taxpayers are found to have been affected adversely by collusion between pharmaceutical companies to raise the price of drugs, Assistant Attorney General for the antitrust division at the Department of Justice Makan Delrahim confirmed that legal action may follow. In a statement, he said: “[The DoJ] will get involved on the civil side and recover damages for the U.S. government. To the extent that taxpayers have had to pay that bill, I think the taxpayers should recover.”

This latest shot fired in the current administration’s attempts to bring down the price of generic drugs for ordinary Americans comes off the back of serious legal tussles last year, when nearly every US state sued Mylan President Rajiv Malik, Emcure CEO Satish Mehta and 18 companies including Sandoz and Teva – alleging price fixing over 15 generic drugs.

So far, the investigation has claimed guilty pleas from two senior figures at a subsidiary of Emcure LTD – Heritage Pharmaceuticals and secured their cooperation as part of the deal. It is expected that their testimony will strengthen the investigation and provide evidence to pursue further litigation.

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In today’s fast-growing, highly regulated generic pharmaceutical market, companies increasingly require specialized legal guidance as their products are developed, launched, and litigated. Wilson Sonsini Goodrich & Rosati’s attorneys address this need by providing expert counsel to companies in the global generics industry, offering sophisticated representation far beyond the scope of general corporate and securities counsel.

We have assembled a highly experienced team of experts from a cross-section of the firm’s key practice areas, including intellectual property, litigation, antitrust, FDA/regulatory, technology transactions, exports and FCPA, trade secret, and trademark and copyrights. Led by the former chief legal officer of Mylan Pharmaceuticals, one of the world’s leading generic and specialty pharmaceutical companies, our attorneys work closely with our generic pharmaceutical clients’ legal and scientific personnel and senior management to understand and meet their specific needs both in the U.S. and abroad.