Drugmaker secret emails show they colluded to boost prices, NJ claims

A complaint filed filed in May against some of the nation's biggest generic drug companies was unsealed Monday, showing what authorities said was a bid to collude and artificially inflate prices on more than 100 drugs.

Among the allegations: Teva Pharmaceuticals, a company planning to move its U.S. headquarters to New Jersey, routinely conspired with its competitors to coordinate price hikes in a strategy to turn the struggling company's financial fortunes around.

"The defendants actively avoided written communications about their illegal conspiracy, but that did not stop our investigation from uncovering messages that open a window into their illegal actions to drive up drug prices for consumers in New Jersey and across the country,” New Jersey Attorney General Gurbir Grewal said in a statement.

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The lawsuit, filed May 10, was released shortly after a federal judge granted a motion by New Jersey and 42 other states to unseal the document.

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In the lawsuit, 20 companies were named as defendants. Of those, 11 are based in New Jersey. And a 12th, Teva, has announced plans to move to the state with the potential of $40 million in tax breaks.

It casts the generic drug industry, touted as one that offers low-cost options to brand-name drugs, in a new light.

Rather than provide financial relief, the attorneys general said the drug companies instead colluded to hinder competition and unreasonably constrain trade. Learn more about the lawsuit in the video at the top of this story.

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It marked the second lawsuit in an investigation that has put New Jersey's generic drug industry under the microscope.

The first one, filed in 2016, centered around Eatontown-based Heritage Pharmaceuticals. Its chief executive, Jeffrey Glazer, and his brother-in-law, Jason Malek, also a Heritage executive, have entered into settlement agreements and are cooperating with the Attorneys General.

Heritage isn't named as a defendant in the latest lawsuit. But it makes an appearance. 

As part of the new lawsuit, authorities pointed to an email sent by Heritage Pharmaceuticals' lawyer to Glazer in October 2014, shortly after the company received a letter from federal lawmakers as part of their investigation into generic drug price hikes.

It showed, they said, that Heritage's outside counsel immediately coordinated a response with lawyers for Teva and Mylan. The consensus, the lawyer said, was to politely tell the lawmakers to shove off.

Teva is featured prominently in the new complaint. The company worked closely with competitors to sustain and increase prices on generic drugs, according to the lawsuit.

In April 2013, the complaint said, Teva hired Nisha Patel as director of strategic customer marketing, essentially to increase prices.

By mid-May, it said, she had ranked 56 competitors — the highest of which followed each other's price increases, according to the complaint.

Teva denied wrongdoing when the lawsuit was first filed, saying that the company "continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability."

The trade group for the generic drug industry, the Association for Accessible Medicines, couldn't be reached for comment late Monday.

But it responded to a CBS "60 Minutes" story last month about allegations of price fixing in part by saying: "Today’s generic drug industry is characterized by intense competition. As a result, pricing data from the last three years indicate that generic prices have declined overall and saved patients and taxpayers literally billions of dollars compared to brand-name drug prices."

"AAM is fully committed to compliance with all laws and to maintaining high ethical standards in the way we do business," it said.

State authorities, however, say consumers could have saved more money if the industry played fair. The complaint says company executives used code words, like "playing nice in the sandbox," "fair share" and "fluff pricing" as a way of inflating prices on what is designed to be a lower-cost option.

In one example, it said senior executives at Mylan and Sandoz spoke at least 21 times on the phone to share the market for a generic version of Valsartan blood pressure medicine that was being launched on the same day: Sept. 12, 2012.

"I guess that's why they call it 'co-opetition,'" a Sandoz executive said, according to the lawsuit.

Michael L. Diamond is a business reporter who has been writing about the New Jersey economy for 20 years. He can be reached at 732-643-4038; mdiamond@gannettnj.com; and @mdiamondapp.