FTC, NY Sue to Ban Martin Shkreli From Pharmaceutical Industry

January 30, 2020 - The Federal Trade Commission and the New York Attorney General Letitia James filed a complaint in federal court against Vyera Pharmaceuticals, Martin Shkreli and Kevin Mulleady, seeking to ban the Vyera owners from the pharmaceutical industry. 

The complaint filed in the US District Court for the Southern District of New York on January 27 alleges that Vyera and two of its owners and executives–Shkreli and Mulleady–have been using an “elaborate anticompetitive scheme” to create and maintain a monopoly for Vyera’s Daraprim. 

The case seeks to end Vyera’s course of conduct and prevent similar and related conduct in the future. It requests a permanent lifetime ban to prevent Shkreli and Mulleady from owning, either partly or entirely, or working with a company engaged in the pharmaceutical industry again. 

The price of the life-saving drug increased by more than 4,000%–from $17.50 per tablet to $750 per tablet–soon after Vyera acquired the US rights to Daraprim in 2015. The exorbitant price represents just the tip of the iceberg that was the scheme Shkreli allegedly orchestrated.

“Daraprim is a lifesaving drug for vulnerable patients,” Gail Levine, deputy director of the Bureau of Competition at the FTC said. “Vyera kept the price of Daraprim astronomically high by illegally boxing out the competition.” 

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The commission OK’ed filing the complaint in a 5-0 vote.

Vyera still has a monopoly on Daraprim because other alternative treatments, neither branded nor generic version, have received the US Food and Drug Administration’s approval.

The complaint alleges that consumers and other Daraprim purchasers could have saved tens of millions of dollars if not for the anticompetitive conduct. 

“Jacking up the price of a lifesaving drug from $17.50 to $750 is brazen&unacceptable,” Sen. Richard Blumenthal (D-CT) said in reaction to the lawsuit on Tuesday. “As a result of Shkreli’s anticompetitive practices, patients lost out on generic Daraprim. The FTC was right to bring a case against Vyera for this price gouging behavior.” 

Shkreli’s infamy stems from Daraprim’s price, leading to his arrest for securities fraud in September 2017. The “Pharma bro” has kept in contact with his close associates, including Mulleady, via regular phone calls, emails and in-person visits to conduct business behind bars. 

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James explained that New York filed the lawsuit with the FTC “to end Vyera’s conduct, make the company return illegal profits & ban Shkreli from working in the pharma industry again.” Shkreli and Vyera “not only enriched themselves, but held this critical drug [Daraprim] hostage from patients & competitors as they illegally sought to maintain their monopoly. We won’t allow anyone to manipulate the market and line their pockets at the expense of vulnerable patients.”

The case, which also names Phoenixus AG, challenges the scheme for preserving monopoly power in the US based on Vyera’s share of the FDA-approved pyrimethamine products market.

Vyera, previously known as Turing Pharmaceuticals AG, knew that Daraprim’s price hike would not be enough to safeguard revenues long-term because the drug would be subject to generic competition with no patent or regulatory protections, according to lawsuits. The scheme was to purportedly preserve Daraprim’s revenue stream after Vyera profits saw its price hike immediately reflected.

The scheme involved agreements with distributors to bar reselling of Daraprim to potential generic competitors through “a complex web of contractual restrictions,” knowing that restricting access to branded Daraprim could stifle generic competition. The alleged web denies generic companies’ ability to conduct the necessary bioequivalence testing for FDA approval.

Several generic companies “tried for more than a year to secure enough branded Daraprim samples for testing, but were unable to do so,” the complaint states. At least one unknown generic company “simply abandoned its development plans” after it “tried to procure samples.”

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Another barrier to entry Vyera erected concerns the issue of Daraprim containing 100 tablets and any generic competitor needing at least 500 to 1,000 tablets to meet FDA requirements for bioequivalence testing. “Thus, even if a generic company broke through Vyera’s web of resale restrictions, it could not obtain enough Daraprim to conduct bioequivalence testing,” filings add. 

The scheme’s data blocking agreements with Vyera’s distributors prevents them from selling Daraprim sales data to third-party data reporting companies like IQVIA. Such data, however, enable generic companies to decide whether to pursue a given opportunity for development.

Generic competition has come under the spotlight in recent years as authorities grapple with skyrocketing prices on brand name drugs. Daraprim is far from being an isolated problem. Insulin prices grew by 1,200% since 1996 and EpiPen by 300%, to name a few others.

Vyera issued a statement in reaction to the complaint. The FTC’s and the NY AG’s claims “are without merit” and Vyera “will vigorously defend these claims in court,” the company said. The allegations of unlawful anticompetitive conduct brought on by the FTC and the NY AG “are unsupported by the facts and overlooks the realities in the marketplace,” Vyera further argued. 

Daraprim has been FDA-approved for the treatment of toxoplasmosis, a parasitic infection that can be fatal in immunocompromised patients such as HIV/AIDs patients, since 1953. It was openly distributed and sold as an affordable treatment prior to 2015 without any restrictions.