The Consumer Union and several Senators question whether Mylan (MYL - Get Report) engaged in a "pay for delay" scheme, in which it may have paid Teva Pharmaceuticals (TEVA - Get Report) to delay the launch of a competitor Mylan's EpiPen.
Consumer Union sent a letter to the Federal Trade Commission on Sept. 7 urging the agency to launch a federal review of Mylan's actions, which it called anti-competitive. The investigation, if launched, would be similar to the one announced by the New York Attorney General on Tuesday. Along with the Consumer Union, Senators Amy Klobuchar (D-Minn.) and Richard Blumenthal, (D-Conn.) sent a letter to the FTC, urging it to review Mylan's practices on Sept. 6.
The complaints are the latest of several against the drug company, which boosted prices of the lifesaving auto-injector, EpiPen, to approximately $600 after acquiring the drug in 2007. The company has upped EpiPen prices approximately 25% each year, while the drug industry average is 10%. Since then, the company has announced that it will provide discounts to patients, as well as a generic version of the drug.
While the concessions are a benefit for consumers, they don't address complaints about a potential "pay for delay" scheme—where companies pay generic manufacturers to delay the entry of their drugs to the market—that some parties allege Mylan participated in. If Mylan is to be found as having participated in such a scheme, the company could be fined heavily, effectively returning to taxpayers some of the profits it was able to milk from EpiPen price increases.
To be sure, the practice was once considered legal under the Hatch-Waxman Act, which controls drug pricing and patents. George Slover, senior policy counsel at Consumer Union, noted in an interview that the act contained loopholes that allowed large pharma companies to delay the entry of competitive drugs to market. But the Supreme Court closed those loopholes in June 2013, with a 5-3 opinion in the Federal Trade Commission vs. Actavis.
"Brand name drug makers have figured out ways to game the system so they essentially buy off the generic makers," Slover said.
It's important to note that Mylan is not under investigation by the FTC at present, but if the agency decides to open an investigation "they could be blocked from continuing to block competition," Slover said. "The contracts that they've got with the schools could be invalidated. There are other remedial actions that the FTC could get the court to order or could get Mylan to agree to."
"Most courts since [the Hatch-Waxman Act] then have looked at these pay for delay claims have concluded that these are illegal," Andy Klevorn, antitrust lawyer at Katten Muchin Roseman LLP said in an interview. "If Mylan did engage in a scheme, they are subject to an investigation."
According to Slover, there are indications that Mylan could have been engaging in these practices with Teva.
In 2012, Mylan and Teva reached a settlement over a patent dispute, although there was no indication from either company that Mylan had paid Teva to delay its generic drug. Whether or not it received payment, Teva agreed to keep a generic off the market until mid-2015.
Mylan could not be reached for immediate comment on this issue, and some analysts noted that the FTC likely would have stepped in if there were a violation stemming from the 2012 agreement between the two companies.
Despite the agreement, Mylan filed a petition attempting to block Teva's EpiPen competitor in 2015, just as the generic was set to come to market.
Teva's generic drug failed to receive FDA approval, so Mylan's attempts to block it from entering the market likely didn't matter much to consumers. Teva plans to refile for approval as early as next year.
But that may have no bearing on any case that the FTC might pursue. According to Slover and Klevorn, the case would hinge on whether lawyers can prove that there was a payment, and that such a payment did delay "meaningful competition."
If so, and the FTC pursues action against Mylan, the consequences could be significant.
For one thing, Slover noted that the contracts that Mylan has with schools could be invalidated.
Several companies have faced FTC investigations into "pay for delay" tactics since the Supreme Court ruled that they violated antitrust laws, including Shire (SHPG) in connection with Adderall, Pfizer (PFE - Get Report) with Lipitor and GlaxoSmithKline (GSK - Get Report) with Zantac. Shire and Glaxo paid fines for their involvement in pay for delay, while Pfizer's legal troubles are ongoing. The FTC was able to go after these companies because their schemes were ongoing.
"The law was unsettled here," Slover said of the environment prior to the Supreme Court ruling. "The Mylans of the world kept hiding behind their patents."