Generic drug makers inflated prices by up to 1000% in the US, according to historic lawsuit

After five years of investigation, prosecutors in more than 40 states in the United States sued more than a dozen executives and 20 different pharmaceutical companies for inflating drug prices by up to 1,000% and limiting competition in the generic drug market.

This is a historic demand to try to close one of the waterways through which the US health system sinks, but it is also a key case to better understand how to design legislation that better defends the rights of patients. The legal battle will last for years, but it will define a good part of the global future of generic drugs.

The demand. Prosecutors accuse manufacturers (which include well-known companies like Teva, Mylan, Novartis, or Pfizer) of artificially raising prices for more than 100 different drugs. But the bad news for the pharmaceutical industry does not end: the Justice Department is conducting a criminal investigation under the antitrust laws and has already announced that it will press charges.

"We have strong evidence that shows that the generic drug industry committed billions of dollars of fraud," said William Tong, Connecticut's attorney general, who coordinates the initiative. "We all wonder why our [US] healthcare, and specifically the prices of generic prescription drugs, are so expensive in this country. This is one of the main reasons."

The conspiracy According to state prosecutors, pharmaceutical companies conspired with each other to raise prices and divide drug markets. As they explain, in addition to communicating through text messages and phone calls, the executives used company dinners, cocktails and golf outings to interpret and perpetuate the plan.

According to investigators, the pharmaceutical company Teva was at the center of the conspiracy to increase prices for each one. Specifically, they state that for 19 months, from 2013 to 2015, Teva significantly increased the prices of approximately 112 generic drugs and colluded with its competitors in at least 86 others.

The answer. "The allegations in this new lawsuit and litigation in general are just that: allegations," Kelley Dougherty, Teva's vice president, said in a statement. Despite this, Teva shares fell 11% as soon as the news was known

And the accusations are very serious. What is clear is that "the prices of hundreds of generic drugs have increased, while some have skyrocketed, without explanation" and the lawsuit with its more than 500 pages of evidence draws a complicated future with (possible) fines of up to 2,000 millions of dollars.

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