Big Generic Drugmakers Will Keep Sweating in Cartel Case

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By Eleanor Tyler

Generic drugmakers from Actavis Pharma Inc. to Zydus Pharmaceuticals (USA) Inc. lost their bid to stop plaintiffs from pursuing limited discovery in a massive price-fixing class action while the Justice Department considers separate criminal charges.

The wide-ranging suit, led by state attorneys general from 45 states and the District of Columbia, alleges that more than a dozen generic drug companies illegally agreed to raise prices on at least 15 products. The DOJ asked to stay discovery for six months while it conducts its own criminal investigation.

U.S. District Court for the Eastern District of Pennsylvania Judge Cynthia M. Rufe gave the DOJ a little breathing room in a Feb. 9 order. She stayed most discovery in the civil suit for three months, half the time the DOJ requested. But she said she won’t bar the plaintiffs from seeking discovery from third parties to the lawsuit during that time, and she attached a list of materials the plaintiffs can seek while they wait.

Accordingly, the drug company defendants will remain under pressure in the civil lawsuit brought by state AGs and private parties while they navigate the criminal investigation underway at the Justice Department.

The DOJ is investigating much of the same price-fixing behavior alleged in the civil lawsuit. Temporarily stopping all discovery in the civil suit would protect the public by “limiting interference with an important, ongoing criminal investigation,” the DOJ argued.

The defendants also asked the court to stay discovery while Rufe considered their motions to dismiss the lawsuit entirely. The states and classes of private parties like insurers and pharmacies asked the court not to make them wait.

Widening Net

Both the civil lawsuit and the criminal investigation have widened during the past year.

The state AGs filed a new, expanded complaint in November that brought price-fixing allegations against a dozen additional defendants involving a dozen more drugs. They also accused individuals at generic drug companies, including Mylan NV President Rajiv Malik, of involvement in the conspiracy.

In the DOJ investigation, meanwhile, two former executives of Heritage Pharmaceuticals, Jason Malek and Jeffrey Glazer, pleaded guilty in early 2017 to fixing prices for generic pharmaceuticals in the criminal probe. Their plea deals mandate full cooperation with the DOJ’s investigation. Both have also settled with the state AGs and pledged to help them in discovery in the civil suit.

The DOJ has convened a grand jury in the Eastern District of Pennsylvania, where the civil suit is also pending, to investigate collusion in the industry. A number of drug companies have admitted receiving subpoenas in the case. The probe has grown over the years to span more than a dozen generic companies and about two dozen drugs, Bloomberg reported.

The case is In re: Generic Pharmaceuticals Pricing Antitrust Litig. , E.D. Pa., No. 16-md-02724, 2/9/18 .

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

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

For More Information

The court's order is at http://src.bna.com/wl7.

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