Jailed ‘Pharma Bro’ Martin Shkreli Facing Antitrust Class Action Linked to ‘Astronomical’ Daraprim Price Increase [UPDATE]

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Incarcerated “pharma bro” Martin Shkreli is among the defendants in a proposed class action that alleges he and the companies he formerly owned, Vyera Pharmaceuticals and Phoenixus AG, sought to monopolize the U.S. market for Daraprim, an essential, life-saving drug used to treat a parasitic infection that can be particularly deadly for those with compromised immune systems.

Plaintiff Blue Cross Blue Shield of Minnesota’s 128-page lawsuit centers on the defendants’ 2015 acquisition of the U.S. rights to Daraprim, the gold-standard treatment for toxoplasmosis. Following their acquisition of Daraprim’s rights, the defendants became the only existing supplier of the treatment and jacked up its price from $17.50 to $750 per tablet, an increase of roughly 4,185 percent, the antitrust complaint says, echoing closely allegations made last year by the Federal Trade Commission and seven state attorneys general. Around the time of the price increase in 2015, Shkreli drew visceral backlash, earning him the “pharma bro” nickname. 

Because Daraprim, a treatment used by cancer and HIV/AIDS patients, was without patent and regulatory protections, the defendants understood that such a significant price jump would cause competitors to develop generic versions of the treatment and sell them at lower prices, the case relays. To prevent this from happening, and to make the planned price increase “commercially viable,” Shkreli, Vyera, Phoenixus and ex-Phoenixus CEO Kevin Mulleady executed a scheme to squash generic competition for Daraprim and force buyers to pay “grossly inflated prices,” all while concealing and misleading the public about their anticompetitive conduct, the lawsuit alleges.

According to the lawsuit, the defendants’ scheme, which predates the actual price increase itself, “spanned multiple fronts.” First, the suit says, the defendants blocked competitors from obtaining Daraprim samples needed to launch a generic product. The case relays that before a generic can be sold in the United States, the FDA requires manufacturers to perform tests to establish that the proposed generic drug is “bioequivalent” to its branded counterpart. 

Publicly, the defendants attested that they welcomed generic competition, but in private, the parties “blocked competitors from performing generic testing through contractual restrictions that forbade distributors and other purchasers from selling Daraprim to generic companies,” the lawsuit claims. These resale restrictions, the purpose and scope of which the case says were “repeatedly misrepresented,” worked to prevent would-be generics makers from acquiring Daraprim samples necessary to perform FDA-mandatory testing, according to the complaint.

Moreover, the defendants are alleged to have ensured their competitors would be without the necessary ingredients to make generic Daraprim, the case goes on. The lawsuit says generic makers typically do not synthesize the active pharmaceutical ingredients used in their products, but instead purchase the API from specialty manufacturers. The defendants, according to the suit, worked to corner the market for pyrimethamine, the API needed to make Daraprim, in order to cut off generic makers’ access, including by entering into an exclusive supply agreement with the then-only known supplier of pyrimethamine in the U.S.

Further still, the defendants denied generic suppliers access to sales data critical to determining whether developing a Daraprim generic was commercially viable, the case says. Per the suit, generic companies ordinarily acquire sales data from third-party reporting companies that collect and aggregate sales details from the marketplace. The defendants, however, imposed “data-blocking” agreements that halted distributors from selling Daraprim sales numbers to the reporting companies, according to the complaint. 

The lawsuit summarizes that the defendants sought to hide their Daraprim scheme through “deception and fraud” amid public denials of their efforts to close the door to generic competition, misrepresentations of sale and distribution restrictions and the claim that the secrecy was necessary to “serve patients’ interests.” 

“None of their claims were truthful,” the suit alleges. “The purpose and effect of Defendants’ scheme has been to unlawfully monopolize the U.S. market for Daraprim by excluding lower-priced generic competition, with the goal of extracting monopoly profits at the expense of Daraprim customers.”

Shkreli is currently serving a seven-year prison sentence in Allenwood, Pennsylvania for defrauding investors in Retrophin, another company of his creation. The lawsuit’s filing comes a little more than a year after the FTC and state of New York sued Shkreli and Vyera in January 2020, an action that was latched onto by six more states soon thereafter.

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