NYPD union goes after drug prices amid DOJ pharma probe

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As the generic drug industry braces for charges from a two-year U.S. Justice Department antitrust investigation, a union representing the sergeants of the New York Police Department is attempting to hit some companies with civil penalties as well.

A pair of lawsuits filed by the Sergeants Benevolent Association Health & Welfare Fund against two groups of drugmakers, which include Switzerland-based Novartis AG’s generic drug unit, along with Ireland-based Perrigo Co., India’s Wockhardt Ltd. and Taro Pharmaceutical Industries Ltd., allege the companies colluded to raise prices on two dermatological creams as much as 1,000% starting in 2013. Taro is the Israeli subsidiary of India’s largest drugmaker, Sun Pharmaceutical Industries Ltd.

Since the proposed class-action suits were filed in September and October, at least four other unions have filed suits of their own, with two of them adding Actavis Inc., acquired in August by the world’s largest generic drugmaker, Israel’s Teva Pharmaceutical Industries Ltd., to the list of defendants. All the plaintiffs manage health benefits for their members. A lawyer for the sergeants union, Peter Safirstein, said in an interview he expects a judge will call a conference in December to decide if the cases will be combined.

Pricing trends in the U.S., which is the world’s largest pharmaceutical market, are important to drugmakers from around the world. Teva, for instance, gets more than half its revenue from North America and Indian drugmakers are among the biggest suppliers of generics to the U.S.

Still, the U.S. pharma sector is now facing sharp scrutiny on pricing, including a sweeping Justice Department probe. That antitrust investigation spanning companies from around the world is examining whether some executives agreed with one another to raise prices on generic medicines in the U.S., Bloomberg News reported earlier this month, citing people familiar with the matter. Some of the companies named in the lawsuits have disclosed receiving subpoenas from the Justice Department relating to generic drug pricing while some have not.

Skin medicines
Perrigo, Taro and Teva, which acquired Actavis from Allergan Plc, declined to comment on the lawsuits. Wockhardt and U.S.-based Akorn Inc., owner of Hi-Tech Pharmacal Co., which was also named in the suits, didn’t respond to requests for comment.

Novartis’s Sandoz unit in a statement also declined to comment on the suits and said net prices of its healthcare products in the U.S. went down 7% in 2015 considering all decreases and increases. Although Sandoz received a Justice Department subpoena in March, the company said it believes it relates to the industry-wide investigation into generic-drug pricing in the U.S. and hasn’t been notified that it is a target of the investigation, according to the statement.

Actavis, Taro and Teva have also disclosed subpoenas from the Justice Department and have said they are cooperating with the agency. The other companies named in the class action lawsuits haven’t reported subpoenas from the agency, based on the filings analyzed by Bloomberg. Wockhardt hasn’t been approached by U.S. officials as part of the investigation, Chairman Habil Khorakiwala said in an interview in London on Wednesday. Perrigo didn’t comment on the probe.

In their suits, the NYPD sergeants allege the largest manufacturers of a pair of generic skin medicines, clobetasol propionate and desonide, which treat conditions like eczema, dermatitis and psoriasis, agreed at meetings of an industry association to raise prices together. They allege that pricing data and timelines show each company raising their prices by almost exactly the same amount within months of attending the meetings.

For example, the sergeants’ clobetasol suit alleges Sandoz, Akorn’s Hi-Tech, Perrigo, Taro and Wockhardt each attended the annual meeting of the Generic Pharmaceutical Association in North Bethesda, Maryland, on June 3 and June 4 in 2014, and then cites National Average Drug Acquisition Cost data to show in the following three months the price for clobetasol increased about 1,140%. The Generic Pharmaceutical Association didn’t respond to requests for comment.

One of the follow-on suits from a union representing electrical contractors in Illinois cites the same data to allege that Taro instituted price increases on its clobetasol product on the opening day of that meeting. Then Novartis’s generic drug unit, Sandoz AG, raised its own clobetasol prices about a month later, and two other companies, Hi-Tech and Wockhardt, each raised their price the following two months, according to data cited in the suit.

About a year after the 2014 annual meeting of the Generic Pharmaceutical Association, Sandoz, Hi-Tech, Perrigo and Taro had all raised their prices 894.35% for the topical gel form of clobetasol, according to data cited in the sergeants suit. Wockhardt does not produce clobetasol as a topical gel, according to the data.

"So that’s sort of an odd number, right?" the NYPD sergeants union’s lawyer, Peter Safirstein, said by phone from New York. "Is it a coincidence that every single manufacturer happens to be at 894.35% for a topical gel as a price increase?"

The plaintiffs say the increased prices on these commonly prescribed skin medicines decreased the care they could offer.

"It’s almost a zero sum game," said the NYPD sergeants’ Safirstein. "If you’re paying more for clobetasol, that means there’s less money for everything else."

Generic drugs
Novartis’s Fougera unit and Taro, along with Perrigo, are also named in a second suit the sergeants union filed over the skin cream desonide, which alleges two 2013 meetings of the Generic Pharmaceutical Industry Association were the occasions where the alleged collusion to raise prices on that medicine took place.

Actavis is named as one of the defendants in follow-on suits covering both clobetasol and desonide from the International Union of Operating Engineers Local 30 Benefits Fund and the Plumbers and Pipefitters Local 178 Health & Welfare Trust Fund.

All the suits cite various investigations by the U.S. Congress into drug pricing, and Taro’s disclosure that it had received a subpoena from the Justice Department over drug prices and communications with competitors, as reason to allege collusion occurred.

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