Big Generic Drugmakers Must Defend Propranolol Antitrust Claims

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By Eleanor Tyler

Teva Pharmaceuticals USA Inc., Heritage Pharmaceuticals Inc., Par Pharmaceutical and several other generic drug makers must defend claims that they conspired to manipulate prices for the beta blocker propranolol, a New York federal judge ruled April 7 ( In re Propranolol Antitrust Litig. , 2017 BL 114583, S.D.N.Y., 16-CV-09901 (JSR), 4/7/17 ).

The suit is one of several that targets sudden steep price increases on older generic staples that previously had been cheap and easily available. In addition to the civil lawsuits for treble damages under antitrust laws, the same generic drugmakers face a Justice Department criminal investigation into pricing of several generic drugs, including propranolol.

In an unusual step, the government intervened in the New York district court case seeking to halt discovery while it conducts a criminal investigation. But its efforts were only partially successful.

Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York on April 7 denied the defendants’ motion to dismiss the lawsuit, clearing the first hurdle to an award of damages for direct and indirect purchasers of tablets and capsules containing propranolol.

Rakoff held that the plaintiffs have pleaded a viable claim of price fixing on propranolol capsules and tablets, saying that the defendants’ explanations for the price increases are “unpersuasive.”

Rakoff dismissed several state law claims by the indirect purchasers for technical reasons. The plaintiffs may plead again to fix their mistakes for most of those claims. But Rakoff dismissed with prejudice antitrust claims under Alabama law and consumer protection claims in New York, California, Illinois, South Carolina and Vermont.

This could well be one of Rakoff’s last actions in the case -- the Judicial Panel on Multidistrict Litigation decided to consolidate the propranolol actions into the burgeoning multidistrict litigation alleging price fixing in multiple drugs that is pending in Pennsylvania.

Unusual Government Request

It is unusual for the Justice Department to seek a stay of discovery as it did in this case. Rakoff at first refused to hold up the civil action on behalf of the government, but he partially relented after being presented with a sealed motion to reconsider.

The DOJ sought to postpone any depositions of employees or past employees of the drugmakers who were involved in pricing generic drugs. The request suggests that the government may be considering more criminal charges against individuals targeted its investigation. Rakoff refused to delay all depositions in the case, but he agreed to postpone the depositions of Heritage Pharmaceuticals’ former president and former CEO, who have already pleaded guilty to price fixing on a different drug.

Rakoff also ordered the plaintiffs to inform the DOJ of any discovery requests in the case as it moves forward.

The plaintiffs allege overlapping conspiracies by makers of the capsule form of the drug and makers of the tablet form that started in 2013. Prices for both, which had been steadily decreasing since the drug was introduced in 1967, suddenly increased on some forms of the drug by more than 1,700 percent, the complaints said. No increase in costs, problems with supply, or other business reason for the price hikes existed, the plaintiffs said.

Additional lawsuits targeting the price of propranolol were recently consolidated into generic pricing litigation in Pennsylvania federal courts.

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

For More Information

The court's decision is at http://src.bna.com/nJK.

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