Life Science Compliance Update

December 16, 2016

Twenty State Attorneys General Sue Pharma Companies for Alleged Conspiracy

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Twenty states have announced that they have filed a lawsuit against generic-drug makers including Heritage Pharmaceuticals Inc., Teva Pharmaceuticals USA Inc., Mylan Pharmaceuticals Inc., Aurobindo Pharma USA Inc., Citron Pharma LLC, and Mayne Pharma (USA) Inc., alleging that the companies conspired to fix prices and constrain competition for antibiotics and diabetes treatments.

The suit, filed in Connecticut federal court (redacted version here), claims that an investigation by that state into the generic drug market has uncovered evidence that some of the companies illegally divided up the market for doxycycline hyclate, an antibiotic used to treat respiratory tract infections.

Mylan released a statement that said it knows “of no evidence” that it participated in price fixing. Teva said it has “not found evidence that would give rise to any civil or criminal liability.” No other companies have responded to requests for comment by Courant.

Connecticut Attorney General George Jepsen noted that the investigation began two years prior, when an assistant attorney general read a news report about high generic drug prices – “something seemed fishy.” Jepsen filed the civil lawsuit to seek financial damages on behalf of patients and the Connecticut’s Medicaid program. The investigation is ongoing and Jepsen noted that he believes this “is just the beginning.”

Jepsen will continue to not only pursue the present lawsuit, but also other enforcement actions, aggressively and will work with other state officials “to restore competition and integrity to this important market.”

The complaint accuses the defendants of coordinating their schemes through direct interaction with their competitors at industry trade shows, customer conferences, and other events, as well as through emails, phone calls, and text messages. The states have alleged that the efforts to fix and maintain prices, allocate markets, and thwart competition, caused significant, harmful, and continuing effects in America’s healthcare system.

Prices for dozens of generic drugs have "uncharacteristically risen," some skyrocketing for no apparent reason, prompting complaints from public officials, payers and consumers, the lawsuit says. In some cases, costs have doubled, tripled or increased up to 1,000 percent or more, state officials say.

The lawsuit states manufacturers of generic drugs have said the significant price increases were due to industry consolidation, plant closures required by the U.S. Food and Drug Administration (FDA), elimination of unprofitable generic drug product lines and other factors.

States allege that the drug companies knew their conduct was illegal and attempted to avoid communicating in writing, or once they knew of the investigation, attempted to delete written communications. Such conduct violates federal law barring monopolistic business practices, according to the States.

The pleadings request the Court stop the companies from engaging in illegal, anticompetitive behavior and for relief, including financial relief.  

The lawsuit by the states comes one day after DOJ filed charges against two former Heritage Pharmaceutical executives for allegedly plotting to fix prices of antibiotics and diabetes treatments. This move by the DOJ marked the first charges in the criminal probe of the generic drug industry. Jeffrey Glazer, the former CEO, and Jason Malek, ex-president, were each charged with two counts of conspiring with other (unnamed) drugmakers, from April 2013 to at least December 2015.

While Heritage commented on the accusations of the executives, noting that its internal investigation found a “variety of serious misconduct” by the two individuals who were charged and they were fired. Heritage also said they “are fully cooperating with all aspects of the Department of Justice’s continuing investigation.”

November 23, 2016

Emanuel Announces Efforts to Combat Opioid Abuse Including Registering Pharmacetical Sales Reps

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In early October, Chicago mayor Rahm Emanuel announced a “series of efforts to combat heroin and opioid addiction throughout Chicago.” According to a press release on the City of Chicago’s website, “these proposed efforts would increase the City’s annual investment in addiction treatment by 50 percent…and create improved regulation of pharmaceutical representatives.”

Chicago seems to place much of the blame on pharmaceutical representatives marketing to medical professionals. As such, Mayor Emanuel proposes to “establish a pharmaceutical representative license above the current Limited Business Licensing required for these individuals in Chicago.”

Chicago seems to be following in the footsteps of Washington, DC, noting that “pharmaceutical representatives will be required to receive additional training and education and provide the city with information on opioid sales and marketing.” Through this extra licensing, the city would enable medical professionals to report complaints against pharmaceutical representatives for deceptive and/or unethical behavior and monitor, audit, and adjudicate such complaints. Part of the additional training would focus on prescription abuse, ethics, and marketing practices from programs certified by the city.

Sometime this month, the city expects to introduce an ordinance that would require the extra licensing. The city is also considering requiring pharmaceutical representatives to track which doctors they contact, and potentially supply names to the city upon request. The ordinance would also require licensed representatives to record the number of health providers they contact and the drug information they offer, keep track of when and to whom they hand out samples, and note whether the physicians are compensated for their time.

According to Dr. Julie Morita, commissioner of Chicago’s Department of Public Health, the city is working on how it would enforce the ordinance and punish violators, though pulling a representative’s license might be one such possibility.

The licenses would cost roughly $750 per representative, annually (compared to the $175 fee in Washington, DC). The estimated $1 million in license fees would support the licensing program as well as help support treatment for addiction. When asked if the ordinance was just another way for the city to make money and add to their revenue rolls, Dr. Morita stated it was about protecting the health and well-being of Chicagoans.

Other Efforts

The city of Chicago has long been known to aggressively challenge marketing practices of the pharmaceutical industry, most notably by filing a lawsuit against several opioid manufacturers. In addition to the additional licensing requirement, Emanuel plans to expand investments to treat heroin and opioid addictions, including $700,000 in new funding that will be focused on opioid treatment deserts where there is a disproportionate level of addiction and the need is greater than the availability of services.

Chicago will also invest $250,000 in naloxone, going to the Chicago Recovery Alliance, to increase access to the overdose antidote in the communities that have been hit the hardest by the opioid epidemic.

Focusing on education and awareness of addiction prevention and treatment, Chicago has secured $350,000 for education campaign (including a $300,000 grant from Pfizer and two $25,000 grants from CVS and Walgreens). The education campaign will include outreach to community and to the healthcare providers who prescribe opioids, helping them to understand the dangers of opioid addiction and apply recent guidelines from the Centers for Disease Control and Prevention to prevent overprescribing.

These efforts follow a July agreement between Pfizer and Chicago, where both parties agreed to a painkiller marketing code, which we highlighted in the October issue of Life Science Compliance Update.

Industry Response

The Chicago Tribune reached out to the Pharmaceutical Research and Manufacturers of America, asking for comment. PhRMA had not yet been able to review the details and substance of Chicago’s proposal, noting instead, “Industry interactions with health care professionals, however, are extensively regulated by the U.S. Food and Drug Administration. Patchwork local and state initiatives are likely to disrupt the existing federal regulation of important scientific information that benefits both providers and patients.”

November 11, 2016

A Win for Patients: Prop 61 in California Rejected

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We recently wrote about Proposition 61 in California – a measure that would have required drug makers to provide large discounts to state agencies that serve HIV patients, retirees, inmates, and low-income residents. On Election Day, after months of campaigns (both for and against the Proposition), California voters rejected the measure by a vote of 54% to 46%.

As we have previously noted, the law, while it may sound good in theory, had the potential to force the pharmaceutical industry to raise drug prices for veterans and others who benefit from public assistance programs in California.

Diverse Viewpoints

Known as one of the most expensive ballot propositions in the history of California, proponents pulled out all their stops in an attempt to pass the measure, even airing television ads and bringing Bernie Sanders in to hold rallies in Los Angeles and Sacramento. During a November 7 rally, Sanders closed his remarks by saying Proposition 61 “could be the shot heard ‘round the world,” referring to the domino effect in pricing that the measure’s proponents had been touting. Proponents felt that if they pegged California state agencies to the VA’s price scale for drugs, that it would serve as an example to all state Medicaid programs in the country, and thereby indirectly lower the prices for drugs paid by private insurers.

It wasn’t just the pharmaceutical industry that opposed the measure, however. California citizens who opposed the measure believed that the pharmaceutical companies would have shifted their losses onto the backs of consumers who would not be covered by the measure. Many patient advocacy groups also came out against the measure, as it was entirely possible to them that they settle on drug pricing of medicines that are less costly, more easily accessible, and dangerous to patients.  

Rollercoaster of Polls

As recently as just two months ago, the proponents were ahead by a 2-to-1 margin, according to a USC Dornsife/L.A. Times poll conducted September 1 through September 8. That poll found that a full two-thirds of California voters supported Proposition 61.

Following that poll, pharma and its partners “turned up the heat” and spent an additional $22.3 million in advertising against the proposition. It wasn’t just Pharma that opposed the proposition, however. The California Medical Association, representing the interests of over 43,000 California physicians, as well as essentially every veterans organization, who argued that the measure would have prompted drug companies to boost their prices on veterans, even though federal law protects veterans from price hikes on medicine.

Even in the end, the defeat was surprising to many that were paying attention, especially when you take into consideration that polls taken earlier in the falls showed widespread support for the initiative. The measure was introduced in the midst of the widespread backlash to rising drug prices.

Conclusion

According to Darius Lakdawalla, a health economist at the University of Southern California, “there are so many forces that are aligning for some kind of public policy or regulation on pharmaceutical devices. I don’t think this “no” vote really stops that. There’s too much frustration.”

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