Mylan Top Executive Engulfed in Alleged Price-Fixing Ring

(Bloomberg) -- Mylan NV’s second-ranked executive took an active role in a vast and “sinister” price-fixing conspiracy among global makers of generic pills that kept prices of the medications artificially high, dozens of states alleged in a new complaint.

The multiyear civil investigation by state attorneys general has now reached the highest echelons of the drugmakers, naming Rajiv Malik, Mylan’s president and executive director, as one of the first two executives to be targeted in the case. Other managers in the industry are under investigation, according to Connecticut officials.

In the 243-page complaint, the states described how more than a dozen drugmakers worked together to share the market and avoid a "fight to the bottom." At industry conferences, over dinner parties and in hundreds of phone calls, emails and text messages, executives would agree to raise or maintain prices for specific drugs in tandem, or delineate each company’s market share.

The complaint details numerous phone calls and emails between Malik and executives at closely held Indian drugmaker Emcure Pharmaceuticals Ltd. and its subsidiary, Heritage Pharmaceuticals, around the time when Heritage launched an antibiotic. Mylan, then the only other generic maker with a pill on that market, agreed to give up two large accounts to Heritage, helping Heritage enter the market without putting pressure on prices, according to the filling.

“Given direct involvement of executives in this case and the evidence we had implicating them, we felt as a group of antitrust enforcers that it was important to hold these individuals accountable,” Connecticut Assistant Attorney General Joseph Nielsen said Tuesday on a conference call with reporters.

Two Executives Targeted

Attorneys general from 45 states and the District of Columbia are seeking to sue Malik and Satish Mehta, Emcure’s chief executive officer, as part of their expanded complaint against pharmaceutical companies, according to a statement by Connecticut Attorney General George Jepsen.

Mylan said it stands behind its president and will “defend this case vigorously." Malik’s lawyer, Robert Cleary of Proskauer Rose LLP, said in a telephone interview that the executive “emphatically and categorically denies the allegations in the complaint” and “is confident he will be completely vindicated.”

Representatives for Emcure didn’t respond to requests for comment.

Mylan’s shares fell 6.6 percent in New York on Tuesday.
 
The civil investigation has run parallel to a criminal probe by the U.S. Justice Department that has so far led to guilty pleas from two former executives of Heritage, the Emcure subsidiary.

The news couldn’t come at a worse time for Mylan. The drugmaker and other generics manufacturers have faced increasing price pressure as the Food and Drug Administration has tried to push more competing pills on the market. The company has faced criticism in Washington over the price of its allergy shot EpiPen, and in August cut its long-held 2018 earnings-per-share target. 

As described in the highly redacted complaint, drugmakers would agree ahead of time to minimize competition by allocating a “fair share” of the market to each other. When a company needed more clients to reach its shares, a competitor with more than its “fair share” would “identify and ‘walk away’ from a customer or customers by informing them of a significant price increase,” thus allowing the other company to come in with a lower bid, the filing alleged.

“The competitors then continue to divide up customers until they reach an artificial equilibrium,” according to the filing.

In the instance when Mylan agreed to give up two accounts to Heritage when it introduced antibiotic treatment Doxy DR in 2013, Malik cited a prior agreement between the two companies allowing Mylan to enter the market for another drug without competition, the complaint alleges.

“The competitors understood that this agreement would allow Heritage to gain market share without eroding the lucrative Doxy DR pricing in the market at that time,” the states said in the complaint.

Malik has worked at Mylan since 2007 and became president in 2012. Previously, he worked at Sandoz and at Ranbaxy Laboratories Ltd. One of Mylan’s senior-most executives, he’s a regular speaker on quarterly earnings calls. The company, which has a legal address in the Netherlands and is run from Canonsburg, Pennsylvania, describes him on its website as the leader of “all global commercial and operational activities.”

“Mylan has deep faith in the integrity of its President, Rajiv Malik, and stands behind him fully," the company said in its statement.

Widening Lawsuit

Led by Jepsen, the civil investigation is naming executives for the first time, as well as expanding the number of drugmakers in the probe to 18 from six, and the number of drugs to 15 from two, according to Jepsen. Previously, it had focused on an antibiotic and an oral diabetes medication. Connecticut and other states are asking a federal judge to allow them to add to their existing complaint against six drugmakers.

The drugmakers that the states are seeking to add to the lawsuit include Apotex Inc., Dr. Reddy’s Laboratories Ltd., Lannett Co., Glenmark Pharmaceuticals Ltd., Endo International Plc’s Par Pharmaceutical unit, Novartis AG’s Sandoz unit, Sun Pharmaceutical Industries Ltd. and others. Mylan and Teva Pharmaceutical Industries Ltd. were among the drugmakers named in the earlier version of the suit.

“While we do not comment on ongoing litigation, Glenmark prides itself on conducting its business with the utmost integrity and complying with all applicable laws, rules and regulations,” Ramkumar Uppara, a spokesman for the Mumbai-based company, said in an email Wednesday. Dr. Reddy’s is aware of the investigation by the Attorney General of Connecticut and will continue to fully cooperate with all authorities, it said in an email.

Representative for Sun Pharma did not immediately respond to request for comment made Wednesday. Sun shares fell 0.8 percent, Dr. Reddy’s declined 3.1 percent while Glenmark rose 0.7 percent in Mumbai Wednesday.

The complaint said all of the executives had numerous opportunities at annual trade conferences to interact, as well as more private meetings, such as a 2014 steakhouse dinner in Bridgewater, New Jersey where senior executives from Actavis, Aurobindo, Dr. Reddy’s, Lannett and Sun, among others, were present. The complaint also detailed the high frequency of communication between executives, such as 1,501 calls and text messages between executives and salespeople at Teva Pharmaceutical Industries Ltd. and its competitors between July 2013 and 2014.

“Every time we kick a door in we make new discoveries," Jepsen told reporters on Tuesday. In a statement, he described the companies’ actions as “so pervasive that it essentially eliminated competition from the market for these 15 drugs in its entirety.”

The attorneys general will seek reimbursement for consumers and states for Medicaid losses, Jepsen said.

--With assistance from Erik Larson Jared S. Hopkins and Ari Altstedter

To contact the reporters on this story: Caroline Chen in San Francisco at cchen509@bloomberg.net, David McLaughlin in Washington at dmclaughlin9@bloomberg.net.

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Sara Forden at sforden@bloomberg.net, Cecile Daurat

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