A massive healthcare lawsuit hasn't been getting a great deal of attention but it’s been quietly growing, nonetheless. Almost all the states have joined a complaint against generic prescription drug makers that began with a focus on just two drugs, but has expanded to implicate 16 companies and more than 300 drugs. Joseph Nielsen, an assistant attorney general and antitrust investigator in Connecticut who is leading the charge tells the Washington Post that "This is most likely the largest cartel in the history of the United States."
Last month a federal judge ruled that "more than 1 million emails, cellphone texts and other documents cited as evidence could be shared among all plaintiffs," ballooning the scope of this probe into how drug manufacturers who are supposed to be providing lower-cost generic drugs are engaged in illegal price-fixing, and cheating American consumers and taxpayers. Since then, some really damning details have emerged, including the "insider lingo" executives used while working out their collusion "over steak dinners, cocktail receptions and rounds of golf."
It's a very clubby world, it turns out, in which the market for generic drugs is called the "sandbox,” and where all the companies are supposed to cooperate to get their "fair share," meaning spreading the profits out evenly. Not doing so is "trashing the market”—in other words, selling drugs at a price other than what the cartel agreed upon.
Generics are supposed to be bringing health care costs down for consumers. That was the intent back in 1984 when Congress wrote the law establishing rules for generics. "It’s particularly ironic since the whole idea of generic drugs was we would get a lower price," says former Rep. Henry Waxman, the California Democrat who co-wrote the law. "If generic versions are higher than need be through rigged systems, that undercuts the whole idea." That's exactly what's happening.
"There's old, old drugs that have been around a long time, and all of a sudden their price has increased by hundreds of percent and we don't know why," said J.D. Fain, owner of Pieratt's Pharmacy in Giddings, Tex., a small town an hour drive east of Austin.
Except now we pretty much do know why. The companies all carved out and decided their profits amongst each other. That includes, for example, albuterol, sold by generic manufacturers Mylan and Sun. It's an asthma treatment that's increased more than 3,400 percent in price, from 13 cents per tablet to more than $4.70 each. Not because of research and development costs. Not because there's a sudden a shortage of the ingredients used to make it. No, it’s because Mylan and Sun figured out how best to profit off of it.
With 47 states and grocery/drugstore chains like Kroger suing, the practice is being blown wide open and "investigators say voluminous documentation they have collected, much of it under seal and not available to the public, shows the industry to be riddled with price-fixing schemes." They also say they will unveil new details and add more defendants in the next months. They also have the cooperation of two former executives at Heritage Pharmaceuticals, who pleaded guilty to federal criminal charges in a parallel criminal case.
In other words, they have an awful lot of dirt to pile on these executives. The settlements could end up in the billions.