Federal judge denies Martin Shkreli all but one motion to dismiss monopoly claims in the FTC's Daraprim lawsuit
“Pharma Bro” Martin Shkreli filed motions in May to dismiss the FTC’s claims that his company Vyera Pharmaceuticals boxed out competition and created a monopoly for the toxoplasmosis drug Daraprim after raising prices by 4,000% overnight. But on Tuesday, a federal judge said not so fast.
Judge Denise Cote denied all but one request for dismissal. The suit was filed in January by the Federal Trade Commission, New York and other states, which claimed that Shkreli and co-defendant Kevin Mulleady participated in “an unlawful scheme” to hinder generic competition and “preserve a monopoly,” which they allegedly kept going even while Shkreli was in prison, according to court documents.
Shkreli and Mulleady launched Vyera in 2014 — then known as Turing Pharmaceuticals — and snagged US rights to Daraprim for $55 million the following year. Overnight, the company raised Daraprim’s price from $17.50 to $750 per tablet. The move was a familiar one for Shkreli, whose company Retrophin acquired the rights to Thiola in 2014, then raised its price by 2,000%, according to the FTC complaint.
The exec was later removed from the Retrophin board of directors for misconduct, and he’s currently serving a 7-year sentence on fraud charges in relation to his hedge fund operations.
The FTC accused Vyera of setting up a restricted distribution system to prevent generic competitors from getting their hands on samples for bioequivalence testing. And Shkreli has been accused of orchestrating the scheme from prison.
In an Aug. 12 letter to Cote, the FTC said it found records of conversations that Shkreli had with Vyera executives, including Mulleady, on the prison’s TRUFONE and TRULINCS systems. During these calls, the execs allegedly discussed matters “to prevent generic competition to Daraprim.” Shkreli was removed from a New Jersey federal prison and relocated last year after reportedly running the biotech with the use of a contraband cellphone.
The co-defendants argued in court that Vyera negotiated and executed the contracts before the suit was filed. But in a written opinion, Cote called the argument “meritless.”
“The FTC is not required to bring suit at the exact moment contractual negotiations ripen into executed contracts. It is the extant scheme that provides the basis for the lawsuit,” she wrote.
A month after the FTC filed its lawsuit, the FDA approved the first generic for Daraprim, which was in development for 7 years. “This hard-won approval does not immunize the defendants from antitrust liability,” Cote wrote.
“The Amended Complaint explains how multiple manufacturers of generic pharmaceuticals that wish to compete with Vyera have been delayed for years in obtaining FDA approval because of their inability to obtain Daraprim for bioequivalence testing and API from an FDA-approved manufacturer. And of course, Vyera continues to sell Daraprim at the inflated price of $750 per tablet,” her opinion states.
Cote did grant dismissal for one claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law.
“The Amended Complaint does not adequately allege that the anticompetitive conduct it describes is ‘fraudulent,’ ‘deceptive,’ or likely to create ‘confusion’ or ‘misunderstanding,'” the opinion states. “… In fact it asserts that Vyera informed its distributors and suppliers of the purpose behind its desired contractual terms, and Vyera executives testified before the Senate about their intention to prevent potential competitors from obtaining enough Daraprim to conduct bioequivalence testing.”
Shkreli has a lot on the line — the lawsuit requests that the former exec be banned permanently from the pharma industry.