Pages

Wednesday, December 21, 2016

Health Care Reform Articles - December 21, 2016

Letter to the editor: Remove profit motive from U.S. health care system

Maine AllCare has received many responses to the Dec. 5 Maine Voices column, “Trump’s health care policy appears heavy on complexity, light on mercy.” One respondent correctly observed that not every industrialized country has a “single-payer” system.
This observation misses the forest for the trees. Indeed, many countries employ private insurance companies. But they are overwhelmingly nonprofit, heavily regulated public utilities.
Insurance companies process Medicare claims, but most of the time Medicare, not the insurance companies, underwrites the costs of care. There is a reason for this. Having a for-profit health insurance system sets the tone for behavior throughout the system.
The United States is the only country in the world where for-profit insurance and other products and service companies are central to its health care system. It is also the only society where profiteering and wealth extraction from sick, frightened and essentially powerless patients by insurance, pharmaceutical, medical device and other corporate providers of health care products and services (some of them nominally nonprofit) are not only tolerated and permitted, but also often celebrated.
In other countries, the mission of the health care system is facilitating the delivery of health care. Instead, our for-profit system often erects financial and other barriers to care (insurance companies), or prices their products out of reach of most Americans (pharmaceutical, medical device companies and corporate service providers), all in the cause of maximizing profitability.
We offer access to the most profitable services to those able to pay for them, often without regard to their clinical necessity or merit, leading to well-documented over-treatment, sometimes with disastrous results.
In other wealthy countries, health care is a right, not a privilege to be purchased by those with the means to do so, and is considered a public service, not a way to get rich quick. This was the column’s central point, and one worth repeating over and over again.
Philip Caper, M.D. Julie Pease, M.D.
board of directors, Maine AllCare
Portland

Sanders Calls for Investigation of Big Pharma Drug Pushers Over Shocking New Report

From 2007-2012, the Big Three wholesalers earned a combined $17 billion while they collectively shipped 423 million pain pills to West Virginia

by Lauren McCauley - Common Dreams
Reporter Eric Eyre with the Charleston Gazette-Mail published a two-partinvestigative series this weekend exposing what looks like the Big Pharma behemoths profiting off the state's overdose epidemic.
According to "previously confidential drug shipping sales records sent by the U.S. Drug Enforcement Administration to West Virginia Attorney General Patrick Morrisey's office," and obtained by the Gazette-Mail, "drug wholesalers showered the state with 780 million hydrocodone and oxycodone pills" over a six-year period. At the same time, "1,728 West Virginians fatally overdosed on those two painkillers."
"The unfettered shipments amount to 433 pain pills for every man, woman, and child in West Virginia," Eyre notes.
Drawing attention to the "Big Three wholesalers," McKesson, Cardinal Health, and AmerisourceBergen, Eyre writes: "As the fatalities mounted—hydrocodone and oxycodone overdose deaths increased 67 percent in West Virginia between 2007 and 2012—the drug shippers' CEOs collected salaries and bonuses in the tens of millions of dollars. Their companies made billions."
During those years, the Big Three "earned a combined $17 billion in net income" while they "collectively shipped 423 million pain pills to West Virginia, according to DEA data analyzed by the Gazette-Mail."
And despite suspicious cases—such as one "mom-and-pop pharmacy in Oceana [that] received 600 times as many oxycodone pills as the Rite Aid drugstore just eight blocks away"—rules to flag such cases are routinely ignored by drug companies as well as the state Board of Pharmacy meant to police them, the investigation found.
"Large, multi-billion dollar corporations should not make billions pushing addictive drugs," Sanders declared on Twitter Tuesday in response to the news report. "They should be investigated and prosecuted."
But such justice is rare, due to the pharmaceutical industry's "stranglehold" on Congress, as Joseph Rannazzisi, former head of the Drug Enforcement Agency's (DEA) Diversion Control Division, recently explained.
An investigation by the Guardian in October highlighted how heavily-lobbied lawmakers have effectively shielded Big Pharma "pill mills" by passing legislation that prevents the DEA from "[going] after a pharmacist, a wholesaler, manufacturer or distributor," Rannazzisi said, such as those now exposed by the Gazette-Mailinvestigation.
"Distributors have fed their greed on human frailties and to criminal effect," former West Virginia Delegate and retired pharmacist Don Perdue (D-Wayne) told Eyre. "There is no excuse and should be no forgiveness."
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

Senate Aims to Stop Firms From ‘Buying Up Drugs and Jacking Up Prices’

by Robert Pear - NYT

WASHINGTON — On the heels of headline-grabbing price spikes on prescription drugs, a bipartisan Senate report on Wednesday will call on Congress to take action to prevent huge, unjustified cost increases on decades-old prescription medicines that have no competition.
The Senate Special Committee on Aging, reporting the results of a yearlong investigation, said that some drug companies behaved like hedge funds because of the influence of “activist investors.” These companies, the committee said, have developed a “business model that harms patients, taxpayers and the U.S. health care system.”
For years, Republicans have sided with drug companies in resisting legislation to restrain drug prices, on the ground that drug makers need additional revenue to pay for research. But President-elect Donald J. Trump scrambled the politics of the issue during the campaign, and the committee’s call for action comes amid a changing political dynamic.
During his quest for the presidency, Mr. Trump promised to “remove barriers to entry” of “imported safe and dependable drugs from overseas.” He and his staff have not provided details, and it is unclear whether he intends to push for such a proposal. But he told Time magazine after the election: “I’m going to bring down drug prices. I don’t like what’s happened with drug prices.”
Pharmaceutical executives say they worry that Mr. Trump will soon assail a drug company on Twitter, as he has criticized Boeing on the cost of Air Force Oneupgrades and Lockheed Martin on the cost of the F-35 fighter.
And the Senate report provides potential ammunition.
“Our report does not recommend that the government get into the business of setting prices for prescription drugs,” said Senator Susan Collins, Republican of Maine, who led the investigation as chairwoman of the Aging Committee. “We think that would have a harmful impact on the pipeline of innovative drugs.
“On the other hand,” she said, “I don’t think we can ignore the market failures that have occurred. The answer is to figure out how we can revitalize the market so that generic drug producers have incentives to compete with companies that are buying up drugs and jacking up prices to make quick, exorbitant profits.”
Under the business plan the panel examined, companies acquire “a sole-source drug” made by a single manufacturer. Companies typically seek out the best drug available for a condition that affects a relatively small number of patients, then “maximize profits by increasing prices as much as possible,” the report said.
Because the drug is the “gold-standard treatment,” doctors continue to prescribe it, and the market, being relatively small, does not attract competitors. This means the supplier can exercise “monopoly power over its pricing,” the report said.
The committee reviewed more than a million pages of documents obtained from four drug companies and found that investors had “pushed and pressured” company executives to increase prices, often at the expense of patients.
“A new breed of pharmaceutical companies have become very good at targeting drugs whose prices can be manipulated without generic competition,” said Senator Claire McCaskill of Missouri, the senior Democrat on the Aging Committee. In some cases, she said, they have used “patients as hostages.”
In its investigation, the Senate panel scrutinized price increases by Turing Pharmaceuticals, which sells Daraprim, for treatment of toxoplasmosis, a life-threatening parasitic infection; Retrophin, which sells Thiola tablets, to prevent kidney stones in patients with a rare genetic disorder; Rodelis Therapeutics, which briefly held the rights to Seromycin, a tuberculosis drug; and Valeant Pharmaceuticals International, which markets lifesaving heart drugs and medicines to treat Wilson’s disease, an inherited disorder that can cause severe liver and nerve damage.
Valeant’s stock price has plunged in the last year, and the company acknowledged at a committee hearing last spring that it had “made mistakes” in pricing its drugs.
The committee report recommends several steps to “rein in price spikes in off-patent, decades-old drugs purchased by companies that did not bear the drugs’ research and development costs.”
Congress, it said, should try to increase competition by passing legislation to speed the review and approval of lower-cost generic drugs. Federal officials should be required to act within 150 days on applications for the approval of certain generic drugs, the report said.
To encourage drug makers to enter markets where high-priced brand-name products have no competition, it said, the government should offer vouchers promising expedited “priority review” of certain generic drugs.
Under a 2007 law, the Food and Drug Administration has ordered many pharmaceutical companies to adopt special safety measures for particular drugs. The Senate report said brand-name drug companies had abused these drug-safety programs to prevent generic drug companies from obtaining samples of their products. Generic companies need the samples to conduct studies required for the approval of generic drugs.
The report calls for legislation to ensure that developers of generic drugs can “obtain access to samples of the drug needed to show” that their products perform just like the brand-name drugs.
In its report, the Senate Aging Committee also expressed concern about “patient assistance programs” offered by drug companies to help patients pay for high-cost drugs.
Such programs, it said, seem altruistic, but are often self-serving because they allow drug makers to “subsidize the purchase of their own products,” steering patients toward expensive drugs and reducing the likelihood that patients will complain about “outrageous price increases.”
“Patient assistance programs may be more about profit than charity,” the report said.
The report also said Congress should give the F.D.A. authority to allow imports of medicines in narrowly defined circumstances, when consumers face sharp, sudden increases in the price of off-patent drugs that have no competition.
The imports would be allowed only from countries with drug safety standards similar to those in the United States and would end “as soon as the monopoly was broken up,” it said.


Harnessing the U.S. Taxpayer to Fight Cancer and Make Profits

by Matt Richter and Andrew Pollack - NYT

Enthusiasm for cancer immunotherapy is soaring, and so is Arie Belldegrun’s fortune.
Dr. Belldegrun, a physician, co-founded Kite Pharma, a company that could be the first to market next year with a highly anticipated new immunotherapy treatment. But even without a product, Dr. Belldegrun has struck gold.
His stock in Kite is worth about $170 million. Investors have profited along with him, as the company’s share price has soared to about $50 from an initial price of $17 in 2014.
The results reflect widespread excitement over immunotherapy, which harnesses the body’s immune system to attack cancer and has rescued some patients from near-certain death. But they also speak volumes about the value of Kite’s main scientific partner: the United States government.
Kite’s treatment, a form of immunotherapy called CAR-T, was initially developed by a team of researchers at the National Cancer Institute, led by a longtime friend and mentor of Dr. Belldegrun. Now Kite pays several million a year to the government to support continuing research dedicated to the company’s efforts.
The relationship puts American taxpayers squarely in the middle of one of the hottest new drug markets. It also raises a question: Are taxpayers getting a good deal?
Defenders say that the partnership will likely bring a lifesaving treatment to patients, something the government cannot really do by itself, and that that is what matters most.
Critics say that taxpayers will end up paying twice for the same drug — once to support its development and a second time to buy it — while the company reaps the financial benefit.
“If this was not a government-funded cancer treatment — if it was for a new solar technology, for example — it would be scandalous to think that some private investors are reaping massive profits off a taxpayer-funded invention,” said James Love, director of Knowledge Ecology International, an advocacy group concerned with access to medicines.
The debate goes squarely to one of the nation’s most vexing challenges: rising health care and drug prices. Kite is one of a growing number of drug and biotech companies relying on federal laboratories. Analysts expect the company to charge at least $200,000 for the new treatment, which is intended as a one-time therapy for patients.
While the law allows the government to demand drug-price concessions from its private-sector partners, the government has declined to do so with Kite and generally disdains the practice.
Insisting on lower prices, federal researchers say, would drive away innovative partners that speed the drug-development process and benefit patients. But with the government doing so much pivotal research, others say that the private sector cannot afford to walk away.
“The market is so reliant on the knowledge and know-how that comes out of the government and academic labs,” said Dr. Aaron Kesselheim, director of the Program on Regulation, Therapeutics and Law at Brigham & Women’s Hospital in Boston.
Price curbs, he said, “would not suddenly lead to a total abandonment of this pipeline. It couldn’t possibly.”
Drug makers would be especially unlikely to turn away from immunotherapy, where the promising science has set off a “gold rush mentality,” according to Mark Edwards of Bioscience Advisors, a company which tracks pharmaceutical licensing deals.
The National Institutes of Health, the parent agency of the National Cancer Institute, currently has about 400 cooperative research agreements with companies, and licenses hundreds of patented inventions for private-sector development.
Kite executives and national health officials characterize their partnership as a model arrangement in a system established by Congress three decades ago. The system has given birth to the cancer drug Taxol, the AIDS drug Prezista, two cervical cancervaccines and a widely used test for H.I.V. infection, among other innovations.
Kite’s first drug, called KTE-C19, could help thousands of patients each year in the United States with certain blood cancers. If it succeeds, it could generate sales of $1 billion to $2 billion annually, according to Wall Street analysts, making it among the most lucrative drugs to come from government research.
But the government’s share of any Kite success would be modest, much lower than some academic research groups have wrangled in immunotherapy deals worth hundreds of millions of dollars.
Federal officials counter that the reward to the taxpayer is not money but the drug itself.
“This is exactly the way things should work,” said Dr. Steven Rosenberg, who has led the surgery branch at the National Cancer Institute for 42 years and led development of Kite’s drug. Such partnerships, he said, are “absolutely essential or many discoveries will not see the light of day.”
Moreover, government officials say, companies in such deals must take significant financial risks and expenditures on their own, without any guarantee that the drug will be approved.
Kite says it has spent more than $200 million on research and development, including running larger clinical trials than those conducted by the cancer institute, and recently spent about $30 million to build a factory that will be able to make treatments for up to 5,000 patients a year.
Setting the price of the drug, Dr. Rosenberg said, “is for the marketplace.”

A Public-Private Partnership

Like many business deals, this one began with a personal relationship — in this case between Dr. Rosenberg and Dr. Belldegrun.
After finishing medical school in his native Israel, performing surgery in helicopters for the Israeli armed forces, and completing residency at Brigham & Women’s Hospital, Dr. Belldegrun became a research fellow for Dr. Rosenberg at the N.C.I. It was 1985, and Dr. Belldegrun was put to work on a new project of Dr. Rosenberg’s — extracting tumor-fighting immune cells from cancer patients, multiplying them in the laboratory, and putting them back in.
“He was one of the more outstanding fellows to come through,” said Dr. Rosenberg, 76, who is widely considered a cancer research luminary.
When the fellowship ended in 1988, Dr. Belldegrun became a prominent surgeon at the University of California, Los Angeles, but the two men stayed in touch. Eventually, Dr. Belldegrun, 67, got the entrepreneurial bug. He co-founded a biotech company, Agensys, which was acquired by a bigger company for more than $500 million. He was also involved with Cougar Biotechnology, which developed the prostate cancer drug Zytiga and was acquired by Johnson & Johnson for $1 billion in May 2009. A month later, Dr. Belldegrun formed Kite with a group of colleagues and investors to pursue cancer immunotherapy.
That same month, a Florida marine contractor named Eric Karlson, whose non-Hodgkin’s lymphoma was advancing despite four prior treatments, became the first patient treated by Dr. Rosenberg with what would eventually become KTE-C19. The treatment entailed removing some of Mr. Karlson’s immune system T cells from his blood, genetically engineering them to recognize and fight his cancer, multiplying the T cells to huge numbers in the laboratory and transferring them back into his body. After two such treatments, Mr. Karlson remains alive and cancer-free eight years later.
Kite initially thought it would pursue an approach to immunotherapy known as cancer vaccines, but in 2010, Dr. Belldegrun visited Dr. Rosenberg and was shown the X-rays of Mr. Karlson and of a second patient.
Dr. Belldegrun was bowled over. “I had no doubt that this is going to be a drug and, more than that, it will become a platform for multiple products,” he recalled. “We never looked back.”
Over the next two years, the National Cancer Institute worked out a deal with Kite that was signed in 2012. It was the first of eight contracts between the government and the company that generally take two forms.
In one type of contract, Kite licenses patented inventions and agrees to pay the government royalties, roughly 5 percent of sales of any commercial product arising from a particular patent. However, there is no such license specifically for KTE-C19 because the underlying treatment was not patented by the N.C.I., so royalties will be minimal.
Officials say the agency did not apply for a patent because the treatment was similar to what others had been developing. Also, at the time the treatment was first created, in 2007, immunotherapy was considered to have dim commercial prospects.
“Back then, we didn’t even think about commercial aspects,” said Dr. James N. Kochenderfer, a scientist at the agency who designed the treatment when working in Dr. Rosenberg’s group.
Under the second type of contract, known as a cooperative research and development agreement, Kite provides money to the N.C.I. to support research. Kite is now paying $3 million a year to Dr. Rosenberg’s lab and has provided $7.5 million to it in total since 2012. Based on its regulatory filings, Kite is paying $7.8 million a year for research agreements and licenses in total, with at least $4 million of that going to the cancer institute and the rest to academic or corporate partners.
The taxpayer has invested, too. Dr. Rosenberg estimated that the government has spent roughly $10 million over the years on what has become KTE-C19. He said Kite’s $3 million a year is about equal to the taxpayer funding in that area and has helped speed research.
These days, researchers from Kite and the cancer institute, typically including Dr. Rosenberg and Dr. Belldegrun, confer by conference call every other Thursday for 90 minutes. Kite employees have spent long periods at the N.C.I., learning how to manufacture the therapy and how to treat patients in advance with chemotherapy.
“We shouldn’t underestimate the value and the importance of N.I.H., not only to Kite but to the whole field of engineered T-cell therapy,” Dr. Belldegrun said. When Kite signed its first deal with the cancer agency, he said, it “tapped into six years of monumental work that they had done.”
Some immunotherapy competitors marvel at the company’s coup in tapping into the agency’s expertise. “They got 20 years of research all together in one scoop,” said Dr. Carlos Paya, chief executive of Immune Design, which is pursuing a different approach.
But government officials say few, if any, other companies were interested in the technology at the time Dr. Belldegrun came calling. Dr. Rosenberg said that before Kite, a few companies, including Johnson & Johnson, had looked at an earlier version of his technology but were wary because treatment involved processing each patient’s cells.
Government-developed technology available to be licensed to companies is posted on the website of the National Institutes of Health. And when the agency intends to grant a license to a particular company, it publishes that in the Federal Register, inviting public comment and possible competing offers. Both steps were taken in the case of Kite, officials said.
Kite did not get everything the cancer institute has developed in the field. Some other companies, including Opus Bio and Bluebird Bio, got rights to some products, in part because the companies had special expertise that the agency’s researchers desired. But Kite seems to have gotten the balance of them and N.C.I. technology accounts for the majority of its pipeline of possible products, though the company is diversifying.
Dr. Rosenberg professes no interest in the business side of the Kite relationship. He does not own stock in any company, even Kite, though he could get up to $150,000 a year in patent royalties if some of Kite’s efforts pay off.
Dr. Belldegrun, in contrast to his mentor, has commercial flair. He is known for his sharp business suits, lives in the Bel-Air neighborhood of Los Angeles, and seems as comfortable on Wall Street or in high society as in the operating room.
Kite’s relationship with the N.C.I. is an important part of its appeal to investors. In some presentations, Dr. Belldegrun has shown a photograph of himself with Dr. Rosenberg in their younger days. And he persuaded Dr. Rosenberg to speak at Kite’s first big meeting for investors in June 2015, the only time he has ever spoken to Wall Street.
In emails obtained through a Freedom of Information Act request by Knowledge Ecology International, Dr. Belldegrun praised Dr. Rosenberg’s talk and sent him copies of investment reports from the conference written by Wall Street analysts.
“Thank you for making the effort to come to NY,” Dr. Belldegrun wrote. “I heard only raving reviews about your presence and presentation.”

A ‘Reasonable’ Question

The reliance of private companies on government-funded research goes well beyond obvious cases like Kite. In many instances, companies work with universities or medical centers that, in turn, have been funded from the $32 billion annual budget of the National Institutes of Health.
Kite’s two main competitors, Novartis and Juno Therapeutics, for instance, derived similar immunotherapy treatments largely from academic institutions, developed at least in part with government funding. Novartis has a relationship with the University of Pennsylvania, and Juno with the Memorial Sloan Kettering Cancer Center, the Fred Hutchinson Cancer Research Center and Seattle Children’s Hospital.
“For the most important drugs you’ll see some public-sector involvement,” said Bhaven Sampat, an associate professor of health policy and management at Columbia University. He was one author of a study that found that 9 percent of all drugs approved between 1988 and 2005 were based directly on a patent held by the public sector. But 47.8 percent of the drugs relied at least indirectly on some federally funded research.
The figures were higher for more medically important drugs: 17.4 percent had a direct public-sector patent, while 64.5 percent had at least an indirect public-sector influence.
These figures are up sharply from before the 1980s. Such partnerships and licensing deals were encouraged by the 1980 Bayh-Dole and Stevenson-Wydler Acts, and the 1986 Federal Technology Transfer Act. The laws are credited with jump-starting the biotechnology industry.
But from the beginning, some people questioned whether taxpayers were getting a bad deal.
Perhaps the best-known drug developed from a cooperative research and development agreement — the cancer drug Taxol — was the subject of several congressional hearings in the early 1990s that investigated whether the drug’s maker, Bristol-Myers Squibb, charged too much and whether the government recouped enough of its investment. In the end, the pricing was left unchanged.
The N.I.H. argues that if it imposes pricing restrictions, it won’t get partners. In fact, in 1995, it struck from its negotiating tactics a goal that prices be “reasonable.”
“Companies will not take technologies from us if we say the government will decide in the future what the price will be,” said Mark Rohrbaugh, who ran the technology transfer office at the institutes from 2001 to 2013 and is now an adviser to the agency. After the “reasonable price” clause was struck, he said, there was a threefold increase in partnership deals.
The N.I.H. can collect royalties from successful products to help offset the costs of the research, but so far these royalties have been small, amounting to an estimated $135 million in the last fiscal year from 870 licenses, with the bulk of the money coming from a small number of drugs.
“We’re not preoccupied with financial value,” Dr. Rohrbaugh said. “Our mission is treatment of people and improving public health.”
In that regard, the government’s bet on a small company like Kite, which might have seemed risky, appears to be paying off so far. Dr. Belldegrun has largely delivered on promises to raise money, assemble an experienced staff, build the factory, conduct clinical trials and begin to apply for regulatory approval. Once considered the underdog to Novartis and Juno, Kite might be the first reach the market.
Academic centers and companies often drive harder bargains in licensing technology. In some cases, academic centers own a stake in a company they license technology to, allowing them to reap a financial windfall if the company does well. Both the Hutchinson cancer center and Sloan Kettering have owned stock in Juno and are entitled to substantial payments — up to $350 million and $150 million — if Juno’s stock reaches certain levels.
The N.I.H. does not take equity positions in companies to avoid an appearance of a conflict of interest. So to critics of the government deals, drug prices are crucial to understanding taxpayer value. After all, they ask, is a drug truly widely available — which is what the government says is its measure of success — if it costs too much for some people?
Rachel Sachs, an associate law professor at Washington University in St. Louis and expert in innovation policy, said the government had every right to seek price concessions. She noted that the government, through Medicare and Medicaid, was effectively buying its inventions back from itself. “The public is paying for the research and to the extent that many people, if not most, will pay through public insurance, we’re paying again,” she said.
Hillary Clinton, in her campaign for president, promised to set new rules for federal support of research so that Americans “get the value they deserve” for the money taxpayers spend in supporting research. It is not clear how President-elect Donald J. Trump will approach these issues; he has said he favors reducing health care costs, but Republicans, who control Congress, too, have opposed a government role in price setting.
One mechanism to control pricing already exists. It is called march-in rights, and it lets the N.I.H. take back control of a patent on an invention made with federal funding if the drug is not being made available to the public on reasonable terms. The tool has gone unused.
Earlier this year, Knowledge Ecology International and another advocacy group, the Union for Affordable Cancer Treatment, petitioned the agency to exercise march-in rights on Xtandi, a prostate cancer drug that was developed by federally funded researchers at U.C.L.A. It said the price in the United States of about $129,000 a year, two to four times that in other developed countries, meant the drug was not reasonably available. The effort was supported by other public interest groups and some Democratic members of Congress.
U.C.L.A. made more than $500 million by selling its royalty rights to the drug. But the N.I.H. declined to exercise its march-in rights on Xtandi, arguing that it was not qualified to judge whether a drug’s price is reasonable and that a high price does not mean a drug is not being made available to the public.
“N.I.H. has made it clear that its job is not to decide prices of drugs, period,” Dr. Rohrbaugh said
Kite says it has not decided what to charge for KTE-C19, but Dr. Belldegrun hinted that Kite’s therapy might be relatively expensive because ideally it would be a single treatment that would cure the patient, not a drug that would have to be taken continuously. He added that Kite would take steps to make sure that everyone who needed the drug could get it.
Meantime, the relationship between Kite and the National Cancer Institute is expanding to develop treatments for other cancers, including one technique Dr. Rosenberg thinks could be used to attack solid tumors like colon, breast and lung cancer.
“The potential for broad applicability is huge,” he said.
That could mean many lives saved and maybe more billion-dollar drugs for Kite and its investors, with the American taxpayer right in the middle of the deal.

2 Former Drug Executives Charged With Price Fixing

by Katie Thomas - NYT

Two former executives at a New Jersey pharmaceutical company were charged with conspiring to fix prices on generic drugs, the Justice Department said Wednesday.
Federal prosecutors said Jeffrey Glazer, a former chief executive of Heritage Pharmaceuticals, and Jason Malek, a former president, were involved in a scheme to artificially inflate the price of an antibiotic and a diabetes medication.
Prosecutors said the charges, filed in federal court in Philadelphia, are part of a broad antitrust investigation into price fixing in the generic drug industry. Most of the major generic drug companies have received subpoenas for information on the topic. Some, including Mylan and the Indian drug maker Sun Pharma, have disclosed that they were asked about doxycycline, a treatment for bacterial infections and one of the drugs involved in the case.
According to the court filings, Mr. Glazer and Mr. Malek conspired with other companies to set the price of the drugs and then divide up customers, preventing competition. The price-fixing activities for doxycycline occurred between April 2013 and at least December 2015, prosecutors said, while the activities for glyburide, the diabetes drug, began in April 2014.
The charges were made as part of an information, which is filed when the suspect pleads to a charge before indictment. It usually happens after a criminal complaint is filed or can be filed in the case of someone who is cooperating. No plea agreement has been filed.
A lawyer for Mr. Glazer declined to comment, and a lawyer for Mr. Malek did not return a call seeking comment. In a statement, Heritage, a New Jersey company owned by the Indian manufacturer Emcure, said it was cooperating with the authorities and fired the two men in August. “We are deeply disappointed by the misconduct and are committed to ensuring it does not happen again,” the statement read.
In November, Heritage sued the two former executives in federal court. The lawsuit argued that they had violated racketeering laws and had “looted” tens of millions of dollars from the company over seven years, using several schemes involving dummy corporations they had secretly formed.
These companies were solely controlled by Mr. Glazer and Mr. Malek, the suit said, but they went to great lengths to make it appear otherwise, using private email servers, fake offices and separate bank accounts. Mr. Malek once even pretended to be a sales representative for one of the companies, giving his name as “Judy Jones,” the suit said.
The suit contends that the men engaged in one particularly “audacious” scheme, in which they arranged deeply discounted sales of Heritage products to the dummy companies they had set up.
Heritage’s customers, including wholesalers and distributors, were deceived into buying the products from the dummy corporations at market value, the lawsuit claimed. Mr. Glazer and Mr. Malek, who is Mr. Glazer’s brother-in-law, kept the profit, it said.
The lawsuit claimed that the two men redirected more than $9 million in sales through one such dummy company, Dorado Pharma, from 2012 to 2015.


Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)