Aetna files lawsuit accusing drug manufacturers of conspiring in generic drug price-fixing scheme
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Industry leaders such as Novartis, Pfizer, and Teva Pharmaceuticals are among the defendants named in the lawsuit. Another 30-plus companies are named as co-conspirators but not as defendants.
As part of a “fair share” scheme, Aetna alleges, the drug companies predetermined market share, fixed prices, and rigged bids on the generic drugs listed in the lawsuit, which include such commonly prescribed drugs as penicillin and amoxicillin.
“They effectuated their market allocation by either refusing to bid for particular customers or providing outrageously high cover bids,” the lawsuit states. “This created an artificial equilibrium that enabled the conspirators to then collectively raise and/or maintain prices for a particular generic drug.”
Aetna claims the defendants’ actions “thwarted competition across the entire generic drug industry” and, as a result, generic drug prices “skyrocketed at unprecedented rates,” with a few increasing by 1,000% or more.
The companies “orchestrated their conspiracy through secret communications and meetings,” at both public and private events, according to the lawsuit. Aetna claims the conspiracy increased the defendants’ profits at the expense of Aetna, consumers, and the government.
In the complaint, Aetna alleges the defendants avoided creating records of their conduct by restricting their communications to in-person meetings (at industry events, for example) or mobile phone calls. Other types of communications, such as written or text messages, were often destroyed, according to Aetna, so there would be no evidence.
Aetna is seeking treble damages for the alleged overcharges, as well as injunctive relief. The complaint states that “virtually none of the defendants or their co-conspirators have withdrawn from the conspiracy,” and “all of them have continued to profit from the ongoing anticompetitive effects that the conspiracy has caused.”
The lawsuit was filed in Superior Court in Hartford, Conn., in late December.
OUR TAKE: Aetna is late to the game.
In August 2018, Humana sued more than 25 drugmakers, alleging price fixing of widely used generic drugs. Like Aetna’s complaint, the one Humana filed also accused the drug companies of engaging in a “far-reaching conspiracy … to blatantly fix the price of such drugs.” It stated that the defendants “conspired to manipulate the relevant markets, allocate these markets among themselves, and obstruct generic competition.” Humana’s description of how the conspiracy was carried out was also quite similar to Aetna’s.
Humana’s complaint listed just 16 specific generic drugs, stating that the insurer purchased the drugs in substantial quantities at grossly inflated prices as a result of the conspiracy. In October 2019, Humana filed a new, expanded complaint naming additional pharmaceutical companies as defendants and more than 100 generics as “subject drugs.”
Meanwhile, in January 2019, UnitedHealthcare filed a similar lawsuit against more than 40 drug companies.
The insurers’ lawsuits follow a suit originally filed in December 2016, and subsequently amended in November 2017, by 46 state attorneys general. The amended complaint named 18 pharmaceutical companies as defendants (versus six in the original complaint), alleging they had conspired to fix generic drug prices. The amended complaint also increased the list of affected drugs from two to 15.
As its basis, the AGs’ complaint used the results of investigations conducted initially by the state of Connecticut in 2014 and later joined by other states.
The DOJ opened its own investigation in late 2014 and began filing charges in December 2016.
In the ensuing years, several of the named defendants have entered into settlements with the DOJ and various states.
For instance, Teva Pharmaceuticals and Glenmark Pharmaceuticals entered into deferred prosecution agreements with the DOJ in 2023 to resolve the charges against the companies. In addition to requiring the companies to pay criminal penalties (Teva, $225 million and Glenmark, $30 million), the agreements included a provision requiring them to divest the generic drug product line at issue in the complaint. Teva also agreed to make a $50 million drug donation to humanitarian organizations.
It will likely take several additional years before the sprawling litigation is completely resolved. Settlements could total billions of dollars, rivaling those involved in litigation surrounding the opioid epidemic.
What else you need to know
All commercial prescriptions dispensed at CVS Pharmacy are now contracted through the CVS CostVantage reimbursement model, CVS Health said in a Jan. 6 news release. CVS announced the new reimbursement model in late 2023 and said it would launch for commercial payers at the start of this year.
The model is similar to Mark Cuban Cost Plus Drugs’ pricing strategy. Cost Plus Drugs adds a flat 15% markup to the cost of drugs, along with pharmacy fees. Under CostVantage, CVS’ pharmacies are reimbursed by contracted pharmacy benefit managers and other payers based on a formula that starts with the cost of the drug and adds a “defined” markup, along with a dispensing fee.
Some industry experts have said CVS could manipulate CostVantage, depending on how the company calculates the acquisition cost of drugs and negotiates markups with payers. CVS said CostVantage should reduce the need to increase prices on some prescriptions its pharmacies fill to offset losses on others. The company plans to eventually expand CostVantage to Medicare- and Medicaid-managed prescriptions.
Belgium-based drugmaker Galapagos announced its intent to separate into two entities. The legacy company will continue to concentrate on its cell therapy platform in oncology, while the unnamed spinoff will focus on building a pipeline of drugs in oncology, immunology, and/or virology “through transformational transactions.” The spinoff will be capitalized with approximately $2.5 billion of Galapagos’ cash. Additionally, the spinoff will apply for listing on Euronext, and all Galapagos shareholders will receive shares of the spinoff on a pro rata basis.
Galapagos and Gilead Sciences agreed to amend the 10-year agreement they entered into in 2019; under the amended agreement, Galapagos will gain full development and commercialization rights to its pipeline and will pay Gilead royalties on net sales of certain products. Although the collaboration with Gilead will continue, after the separation the agreement will apply to the spinoff, not the legacy company. When the separation occurs, Gilead will hold an estimated 25% of the outstanding shares in both Galapagos and the spinoff.
Medtech company Stryker plans to acquire Inari Medical for approximately $4.9 billion. Based in Irvine, Calif., Inari makes devices for treating venous thromboembolism and other targeted diseases. The two companies entered into a definitive agreement under which Stryker will pay $80 per share of Inari common stock, according to the announcement. Both companies’ boards have approved the transaction, which is subject to customary closing conditions. The deal is expected to close this quarter.
Blue Shield of California is restructuring. A new nonprofit entity named Ascendiun was launched on Jan. 1 and is the parent company of Blue Shield of California and its managed Medicaid subsidiary, Blue Shield of California Promise Health Plan, as well as two other entities: clinical services firm Altais and a brand-new health services company called Stellarus that is designed to scale health care solutions for use by other plans. Blue Shield of California’s previous CEO of 12 years, Paul Markovich, is now president of Ascendiun and will also serve as interim president of Stellarus. Lois Quam is Blue Shield of California’s new CEO.
Ardent Health acquired 18 urgent care clinics in New Mexico and Oklahoma from Tempe, Ariz.-based NextCare Urgent Care for an undisclosed sum. The six clinics in New Mexico will operate as part of Lovelace Health System, according to the announcement, and the 12 clinics in Oklahoma will become part of Hillcrest HealthCare System. Through its subsidiaries, Ardent Health, a for-profit health system based in Brentwood, Tenn., that went public in July, operates 30 acute care hospitals and more than 200 sites of care in six states, which also include Idaho, Kansas, New Jersey, and Texas.
What we’re reading
Health Systems Are Struggling to Keep Up With AI—A National Registration System Virtual Cell Is a ‘Holy Grail’ of Science. It’s Getting Closer. The Atlantic, 1.9.25
Changes in Patient Care Experience After Private Equity Acquisition of US Hospitals. JAMA, 1.9.25
The Plight of “Dual Noneligible” People in the United States. NEJM, 1.8.25 (subscription or registration required)
