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Generic Pricing Investigations Expand: Par Is Subpoenaed and the OIG Launches Its Own Investigation

Since we last reported on the generic pricing investigations (click here and here to read more), the investigations have expanded.

Par Pharmaceutical Companies, Inc. disclosed in its March 13, 2015 Annual Report that it had received a December 5, 2014 subpoena from the DOJ’s Antitrust Division that sought “communications with competitors regarding [Par’s] authorized generic version of Covis’s Lanoxin® (digoxin) oral tablets and [Par’s] generic doxycycline products.” Par is the third company that has been targeted by the DOJ, along with Impax Laboratories and Lannett Company.

The disclosures in Par’s Annual Report give more insight into the nature of the DOJ’s investigation. Impax’s 8-K generally described the DOJ subpoena its employee had received as seeking any communication with any generic competitor, while Lannett’s 10-Q disclaimed that the subpoena served upon its VP had focused on specific drugs. In its subsequent 8-K, Lannett described a later DOJ subpoena that had been served upon the company as seeking information related to “certain products.”

In contrast, Par disclosed that the subpoena the company had received sought information related to digoxin and generic doxycycline. While media outlets have long suspected that the DOJ was targeting digoxin price increases, particularly given this NYT article, the focus on doxycycline was not expected.   However, a February 24, 2015 letter from Representative Elijah E. Cummings and Senator Bernard Sanders to Inspector General Daniel R. Levinson identified doxycycline as a drug whose cost to Medicaid had risen significantly while its prescription numbers had dropped by more than twenty-five percent.

In response to this letter from elected officials, the Office of Inspector General has launched its own generic pricing investigation. The OIG will update its review of generic drug price increases under the Medicaid drug rebate program by examining the quarterly average manufacturer prices (AMPs) from 2005 through 2014 to determine the extent to which AMPs exceeded the specified inflation factor. Brand name manufacturers are compelled to pay additional rebates when their drugs’ AMPs increase by more than a specified inflation factor, but there is no such requirement for generic manufacturers.   As part of its study, the OIG will determine the amount of additional rebates Medicaid could have recouped if the statutory inflation factor also applied to generics.

The OIG does not intend to examine the effect of generic drug price increases on the Medicare program at this time, but it will continue to consider whether performing this review is possible.

We will report back with further updates.