States claim victory in pretrial ruling in lawsuit against drug makers

MORGANTOWN, W.Va. — One of two federal lawsuits pursued by West Virginia and other states alleging that a number of generic drug makers engaged in a scheme to fix prices and allot market share took a step forward this week.

The judge denied the defendants’ joint motion to dismiss plaintiffs’ claims that the drug makers engaged in an overarching conspiracy, and allowed the plaintiffs to move forward to establish those claims.

Curtis Johnson, spokesman for Attorney General Patrick Morrisey, commented, “We believe the order is a big win for the states and private plaintiffs. We believe it has the potential to be a significant factor in moving the cases forward.”

Both suits are in the U.S. District Court for the Eastern District of Pennsylvania before Judge Cynthia Rufe. Both allege that the defendant drug firms colluded to fix and raise prices, and to divvy up market share  in order to avoid competition and maintain agreeable, inflated price.

Rufe’s opinion and accompanying order involve a case launched in 2017. The plaintiffs are 47 states, including West Virginia, along with the District of Columbia and Puerto Rico. The defendants are 18 generic drug makers, including Mylan. Rajiv Malik, Mylan president is one of two named individuals.

Rufe’s order also wraps in six other similar suits brought by other parties, including Kroger, which operates pharmacies, and Humana, a health insurance company.

(Not included in her order is the other multistate price-fixing suit, also including West Virginia and Mylan, but not Malik, filed last May.)

The price fixing, the suits allege, was achieved through communications via phone, personal meetings at industry events, and sometimes through emails (though the defendants tried to avoid documenting their dealings). The drug makers called the market allotment “fair share” and the process of allotting fair share, “playing nice in the sandbox.”

Rufe highlights examples of the plaintiffs’ accusations. For instance, “Defendants understood that to effectuate a successful price-fixing and market allocation agreement on one drug, they would need to effectuate an agreement across each defendant’s portfolio of drugs.”

Also, this fraternal culture was enhanced through the regular movement of executives between companies. Malik, for example, worked for co-defendants Sun and Sandoz before coming to Mylan.

It’s worthwhile to quote a bit of the more comprehensible legalese that guided Rufe’s decision. Citing federal rules and case law, she says, “Plaintiffs must allege ‘enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. … Speculative or conjectural assertions are not sufficient. However, plaintiffs are not required ‘to plead facts that, if true, definitively rule out all possible innocent explanations. … And, of course, a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.”

An overarching conspiracy claim, she says, must be weighed against a three-factor test. One, the alleged conspirators were committed to a common goal. Two, the alleged agreement wouldn’t continue without the conspirators’ cooperation. Three, there was sufficient overlap among the participants in the individual conspiracies (that make up the overarching conspiracy).

The plaintiffs’ claims meet all three tests, she says.

She observes, “The connective tissue Plaintiffs have alleged in their Overarching Complaints gives credence to a claim that Defendants engaged in ‘behavior that would probably not result from chance, coincidence, independent response to common stimuli, or mere interdependence unaided by an advance understanding among the parties.’”

Rufe ends her opinion denying the motion to dismiss the overarching conspiracy claims with a caution: “Whether any individual defendant has a specific defense to the claims raised against it in the overarching complaints is a separate question not here resolved.”

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