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The Government Seeks to Intervene in its Third Generic Drug Price-fixing Lawsuit

Since we last reported on the state and federal government’s generic drug pricing investigations and litigations (click here to read more), the U.S. Department of Justice (“DOJ”) has obtained its first guilty pleas.  On January 9, 2017, Heritage Pharmaceutical Inc.’s former CEO and its former president (the defendants are brothers-in-law) pleaded guilty to manipulating the prices of and divvying up customers for an antibiotic, doxycycline hyclate, and a diabetes medicine, glyburide.  The defendants are scheduled to be sentenced on September 28, 2017, and they face up to ten years of imprisonment.  The government’s filings in other lawsuits make clear that the defendants’ sentencing was delayed until the defendants complete their cooperation with the government.

Meanwhile, the lawsuit that twenty state attorneys general filed against six pharmaceutical companies in the District of Connecticut over alleged price fixing of doxycycline and glyburide continues to move forward and expand.  In a motion for an extension of time, the parties indicated that additional plaintiffs may file suit.  Additional state attorneys general or other regulatory bodies may ask permission to join the suit by March 1—the deadline to file an amended complaint. 

But the federal government has already sought leave to join the lawsuit.  On February 9, 2017, the DOJ’s Antitrust Division filed an unopposed motion to intervene in the litigation.  While the court has not yet ruled upon the government’s application, the government’s papers note that it has already been given permission to intervene in two other civil lawsuits.  On January 6, 2017, the government intervened in a case captioned, In re Generic Digoxin & Doxycycline Antitrust Litigation, which is pending in the Eastern District of Pennsylvania.  In this lawsuit, the putative direct purchaser class plaintiffs allege that generic drug manufacturers conspired to allocate customers, rig bids, and fix, maintain or stabilize the prices of two drugs: digoxin and doxycycline.  While digoxin is not at issue in the in the criminal proceedings against the former Heritage executives or in the state attorneys general’s lawsuit, as we previously reported, some of the earliest subpoenas that the government issued in its generic drug pricing investigation targeted digoxin.

On February 8, 2017, the court granted the government’s motion to intervene in FWK Holdings, LLC v. Actavis Elizabeth, LLC, et al., which is a lawsuit that is pending in the Southern District of New York before Judge Rakoff.  In this suit, the putative direct purchaser class plaintiffs allege that generic drug manufacturers conspired to fix the price of propranolol, which is a beta-blocker used to treat, among other things, tremors, angina, and hypertension.  While the government successfully intervened in the FWK Holdings case, the government hit another roadblock.  On February 21, the court denied the government’s oral motion for a stay of limited discovery.  The court, however, permitted the government to submit a written motion for reconsideration supported by an ex parte declaration regarding the status of the criminal investigation.  On February 24, the government moved for reconsideration seeking to stay (1) all document requests regarding the criminal investigation into the generic pharmaceutical industry, (2) all document requests regarding drugs other than propranolol, and (3) the deposition of any defendant’s current or former employee who was responsible for the pricing of generic drugs.  The government’s motion for a limited stay is currently pending before the court.

We will continue to monitor the generic drug pricing investigations and litigations for new developments.