By DON DEBENEDICTIS
SANTA ANA, Calif. (CN) — The Orange County district attorney claims Abbott, Teva and other pharmaceutical companies sold $6.7 billion of the cholesterol drug Niaspan during a multi-year “pay-for-delay” conspiracy that kept keep generic versions off the market.
District Attorney Tony Rackauckas claims Abbott Laboratories paid generics specialty company Barr Pharmaceuticals millions of dollars from 2005 through 2013 so Abbott could retain its monopoly on Niaspan, a time-release form of niacin.
Rackauckas claims the unfair, anticompetitive deal helped the defendants sell more than $6.7 billion of Niaspan or generic Niaspan from 2005 through 2014 “supracompetitive prices,” causing “California users, their insurers, public healthcare providers and other government payors to overpay millions of dollars.”
Retail sales of Niaspan in the U.S. hit more than $1 billion in 2011 and again in 2012, according to the Oct. 4 Superior Court complaint.
“Consumers have the right to have companies compete fairly so that they can obtain prescription drugs at a reasonable cost,” Rackauckas said in a statement. “Companies shouldn’t be allowed to keep their prices artificially high and not have competition by making backdoor deals with their competitors.”
Also named as defendants are Abbvie, Teva Pharmaceutical Industries, Teva Pharmaceuticals USA , Duramed Pharmaceuticals and Duramed Pharmaceuticals Sales Corp. Abbott spun off its Niaspan business to Abbvie in 2013. Teva purchased Barr in 2008, along with its subsidiary, Duramed.
A representative for Teva declined by email to discuss the lawsuit. Abbvie did not respond to a request for comment.
Major pharmacy chains, several unions and the city of Providence, R.I., have filed similar lawsuits alleging a pay-for-delay conspiracy. A number of the lawsuits have been brought together as multidistrict litigation in Philadelphia.
Consumer activists and critics of the pharmaceutical industry have been battling such pay-for-delay arrangements for years. In those deals, also called “reverse-payment agreements,” manufacturers of brand-name drugs pay off generic companies that dispute the patents.
Typically, the brand-name company files patent lawsuits against the generic company and then reaches a settlement in which it pays the other company not to sell a generic version for several years. The arrangements allow the brand-name companies “to sidestep competition,” according to the Federal Trade Commission, which has brought several lawsuits against the deals since 2001.
Because federal drug laws give priority to the first manufacturer to seek approval of a generic version of a drug, the pay-for-delay agreements also block any other generic maker from the market.
According to the FTC, “these anticompetitive deals cost consumers and taxpayers $3.5 billion in higher drug costs every year.”
Niacin is also known as vitamin B3. It can reduce bad cholesterol and triglycerides and boost good cholesterol.
Kos Pharmaceuticals brought Niaspan to market in 1997, and it soon became the company’s biggest source of revenue, according to Rackauckas’s lawsuit. Kos was acquired by Abbott in 2006 and is not a defendant.
In 2002, Barr sought Food and Drug Administration approval to bring out a generic version, even though Kos’s patents were still in effect. Kos sued, but Barr prepared to launch its generic in 2005 anyway.
“Kos recognized Barr’s at-risk launch as a real competitive threat and acted swiftly in response,” the lawsuit states.
But by March 2005, the two companies announced a settlement. “Kos agreed to make unlawful payments to Barr over a period of eight years, and Barr unlawfully agreed to refrain from launching a generic equivalent of Niaspan until September of 2013,” Rackauckas says in the complaint. “That agreement preserved Niaspan’s dominant position in the market, while sharing some of the supracompetitive profits that were the result of that dominant position.”
Kos and Abbott paid Barr $5 million in 2005, $45 million in 2006 and $37 million in 2007, according to the complaint.
The pay-for-delay conspiracy forced California’s medical assistance programs, such as Medicare and Medicaid, to overpay millions of dollars for Niaspan, Rackauckas says.
“Defendants’ unlawful conduct deprived California’s medical assistance programs of the benefits of competition that California’s antitrust and consumer protection laws are intended to preserve.”
Well-known Newport Beach attorney Mark P. Robinson Jr., with Robinson Calcagnie, is co-counsel. He and Rackauckas have worked together on large civil matters before, including a Toyota unintended-acceleration case.
Although he has not handled a pay-for-delay case before, Robinson said in an interview Friday that he brought the Niaspan problem to Rackauckas because he believes it’s “horrible … [that drug companies] are gaming the system by paying the generic companies part of their excess profits” to keep cheaper versions off the market.
As a district attorney, he said, Rackauckas “can bring a stronger action” and obtain more for consumers. “It’s going to help the public,” Robinson said.
The lawsuit accuses the companies of violating California’s unfair competition law and seeks restitution and civil penalties, trebled, of $2,500 per violation.