By Diane Bartz and Sarah N. Lynch
WASHINGTON (Reuters) - Two years after high generic drug prices became a public controversy, legal cases are starting to land.
Twenty states filed a lawsuit Thursday against Mylan NV (O:MYL), Teva Pharmaceuticals (TA:TEVA) and four other generic drug makers, saying they conspired over steak dinners and "girls nights out" on pricing of two common generic drugs, according to a copy of the complaint.
The civil lawsuit, led by antitrust investigators in Connecticut, comes one day after the U.S. Department of Justice filed criminal charges against two generic drug industry executives, alleging that they colluded to fix prices and split up market share. [nL4N1E94KE]
Taken together, the cases are part of a broader generic drug pricing probe that remains under way at the state and federal level, as well as in the U.S. Congress. In 2014, media reports of sharply rising drug prices led to Congressional hearings.
"We believe that this is the tip of the iceberg," Connecticut Attorney General George Jepsen told Reuters in an interview. "Price fixing in the generic industry is widespread and pervasive, and it involves many other drugs and a number of other companies."
Both of the Justice Department defendants are expected to plead guilty. It is typical for the department to file one lawsuit about an ongoing issue and use evidence from those defendants to build subsequent cases against others.
Several companies have publicly disclosed receiving subpoenas from the Justice Department related to generic drug pricing issues. Among them: Mylan, Allergan (N:AGN), which later sold its generic business to Teva, Lannett Co (N:LCI), Impax Laboratories
FROM $20 TO $1,849 IN SEVEN MONTHS
The drugs involved in Thursday's lawsuit include the delayed-release version of a common antibiotic, doxycycline hyclate; and glyburide, an older drug used to treat diabetes. Doxycycline, for example, rose from $20 for 500 tablets to $1,849 between October 2013 and May 2014, according to Senator Amy Klobuchar, a Minnesota Democrat who had been pressing for action on high drug prices.
The lawsuit, filed in the U.S. District Court for the District of Connecticut, names Heritage Pharmaceuticals Inc as a "ring leader" of the price manipulation, and also lists Mayne Pharma (AX:MYX), Aurobindo Pharma (NS:ARBN) and Citron Pharma LLC as participants. The two executives charged in Wednesday's Justice Deparment filing were from Heritage.
According to the complaint, Heritage, Teva, Aurobindo and Citron conspired to raise prices on glyburide; Heritage, Mylan and Mayne conspired to allocate and divide the market for doxycycline.
Heritage, part of India's Emcure Pharmaceuticals, referred back to its Wednesday comment, which blamed the former executives for the price-fixing, and said they had been terminated.
Mylan denied the charge. "To date, we know of no evidence that Mylan participated in price fixing," spokeswoman Nina Devlin said by email.
Teva spokeswoman Denise Bradley said the company has "not found evidence that would give rise to any civil or criminal liability."
The other three companies had no immediate comment.
The lawsuit alleges that drug companies either set prices or allocated markets to prop up prices. Employees knew the conduct was illegal and either deleted emails or made efforts to avoid communicating in writing, the lawsuit alleges.
The attorneys general asked the court to order the companies to disgorge ill-gotten gains, which were not defined, pay attorneys' fees and stop collusion.
The states' complaint names but does not individually charge former Heritage CEO Jeffrey Glazer and former Heritage Vice President of Commercial Operations Jason Malek, the two men charged a day earlier by the Justice Department.
The states' suit puts Glazer and Malek at the center of the alleged schemes. [nL4N1E94KE] The names of the other individuals referenced in the states' lawsuit and the content of their text messages and other communications are redacted.
Some of the alleged collusion occurred at industry conferences and dinners, the complaint said. Female sales representatives gathered for a “Girls Night Out” where they discussed sensitive information, the complaint says.
In one case, it says that Mylan agreed to “walk away” from one large national wholesaler and one large pharmacy to allow Heritage to win business.
Malek, it says, was in charge of communicating with Teva, and he was able to reach a deal to raise prices on glyburide, the suit alleges.
Connecticut's Jepsen said Assistant Attorney General Joseph Nielsen was prompted to investigate by a 2014 article about rising generic drug prices.
In September of this year, he said, Connecticut began pitching other states to join the lawsuit.
To date, the other states that have joined include Delaware, Florida, Hawaii, Idaho, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nevada, New York, North Dakota, Ohio, Pennsylvania, Virginia and Washington.
Jepsen said he expects more to sign onto the case.