Attorney General Keith Ellison has joined 42 other states and Puerto Rico, in a coalition led by the State of Connecticut, in filing a lawsuit against 20 manufacturers of generic pharmaceutical drugs and 15 individual defendants.
The suit filed May 13 alleges that between 2013 and 2015 the defendants conspired to illegally allocate markets and fix prices for 112 prescription generic drugs that treat cancer, diabetes, multiple sclerosis, epilepsy, anxiety, high blood pressure, bacterial infections, HIV and other conditions.
Ellison said while many factors contribute to the high price of pharmaceutical drugs in America, a major factor is putting profits over people.
“Illegal behavior rooted in greed,” said Ellison. “There’s a good reason that this kind of anti-competitive, anti-trust conspiracy has been illegal for more than a century. Holding these manufacturers accountable is exactly the kind of thing the attorney general can do to help Minnesotans afford their lives and live with dignity.”
Rep. Rod Hamilton (R-Worthington), who lives with multiple sclerosis, said, “When you have the greedy corporate drug cartel building a business model that is stealing from the sick, the dying, and the disabled, that is quite frankly maddening.”
He spoke of “countless” contacts he has had from Minnesotans who, because they cannot afford their prescription medications, are having to “choose between paying their bills and saving their lives.”
Dr. Stephen Schondelmeyer, professor at the University of Minnesota College of Pharmacy and a national expert on the economic and social impacts of drug prices, said, “We’ve relied on generics manufacturers to lower the cost of pharmaceutical drugs, and now the very people that we’ve relied upon have turned around and stabbed us in the back with tremendous price increases. This market is broken.”
Hamilton and Schondelmeyer are both members of Attorney General Ellison’s Advisory Task Force for Lowering Pharmaceutical Drug Prices.
This new lawsuit comes on top of another lawsuit against generics manufacturers filed in December 2016, in which Minnesota is also a plaintiff. That suit similarly alleges that 16 other generics manufacturers also conspired to illegally fix prices and allocate markets in what has been called “most likely the largest cartel in the history of the United States.”
The alleged conspiracy
Generic pharmaceutical drugs now represent nearly 90 percent of all prescriptions filled in America. The new lawsuit alleges that through a well understood and widely agreed-upon system, these generics manufacturers and their representatives conspired with their ostensible competitors to allocate markets and to fix prices among them. First, companies that theoretically competed with each other conspired to divide up markets for different generic drugs into what they called a “fair share” for each, based on when each company entered the market for that drug, and agreed not to compete with each other on price or market share. Then those companies actively conspired with each other to charge “supra-competitive” prices for the drug or drugs in that market.
This conspiratorial behavior was called “playing well in the sandbox.” Those competitor companies that were considered to “play well in the sandbox” were called “responsible” or “rational.”
“This is the exact opposite of how rational economic theory has told us markets are supposed to operate,” said Ellison.
He said the behavior has harmed consumers, many of whom have complained to the Attorney General’s Office about sudden, dramatic spikes in the cost of generics, some of which are named in this complaint; payors like insurance companies that have absorbed large cost increases and passed them onto consumers in the form of higher premiums and reduced coverage and taxpayers who pay more to support public healthcare programs. From 2012 to 2016, pharmacy spending per enrollee in Minnesota’s Medicaid program rose more than 56 percent. Nationally, more than $500 million in Medicaid drug reimbursements from mid-2013 to mid-2014, the period in which the alleged illegal market allocation and price fixing took place, was for generic drugs whose prices had increased by more than 100 percent.