Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 1 of 128
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`BCBSM, INC., d/b/a BLUE CROSS and
`BLUE SHIELD OF MINNESOTA, on
`behalf of itself and those similarly situated,
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`
`IN THE UNITED STATES DISTRICT COURT FOR
`THE SOUTHERN DISTRICT OF NEW YORK
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`Case No. 1:21-cv-1884
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`Class Action Complaint
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`Jury Trial Demanded
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`Plaintiff,
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`v.
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`VYERA PHARMACEUTICALS, LLC,
`PHOENIXUS AG, MARTIN SHKRELI,
`and KEVIN MULLEADY,
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`Defendants.
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`Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 2 of 128
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`Plaintiff BCBSM, Inc., d/b/a Blue Cross and Blue Shield of Minnesota, (“Blue Cross of
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`Minnesota”), files this action, individually on behalf of itself and as a class action on behalf of all
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`others similarly situated, against Defendants Vyera Pharmaceuticals, LLC, Phoenixus AG, Martin
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`Shkreli (individually, as an owner and former director of Phoenixus AG, and a former executive
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`of Vyera Pharmaceuticals, LLC), and Kevin Mulleady (individually, as an owner and director of
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`Phoenixus AG, and a former executive of Vyera Pharmaceuticals, LLC), for damages, injunctive
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`relief, and any and all other available forms of relief. Plaintiff demands a trial by jury on all issues
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`so triable and complains and alleges as follows:
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`I.
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`Nature of the Case
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`1.
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`This lawsuit challenges Defendants’ scheme to monopolize the U.S. market for
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`Daraprim—an essential, life-saving drug used in the treatment of toxoplasmosis—through an array
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`of anticompetitive conduct that successfully thwarted generic competition for years and continues
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`to cause supracompetitive prices to this day.
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`2.
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`Toxoplasmosis is a parasitic infection that can be fatal for people with
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`compromised immune systems, particularly those with HIV/AIDS and cancer patients.
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`3.
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`Daraprim is the gold-standard treatment for toxoplasmosis. It was first brought to
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`market in the United States in 1953 by a predecessor of GlaxoSmithKline (“GSK”) and, for many
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`decades, was affordable. However, in 2015, under the direction of Shkreli and Mulleady, Vyera
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`and Phoenixus acquired the U.S. rights to Daraprim from the only existing supplier and raised the
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`price from $17.50 to $750 per tablet—an increase of approximately 4,185 percent.
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`4.
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`Because Daraprim lacked patent and regulatory protections, Defendants understood
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`that such an astronomical price increase would cause competitors to develop generic versions of
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`Daraprim and sell them at lower prices. To prevent this, and to make their planned price increase
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`Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 3 of 128
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`commercially viable, Defendants executed a scheme to thwart generic competition and force
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`Daraprim purchasers to pay grossly inflated prices—all while concealing and misleading the
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`public about their anticompetitive conduct.
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`5.
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`Defendants’ scheme, which began before the price increase itself, spanned multiple
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`fronts. First, Defendants prevented competitors from obtaining the Daraprim samples they needed
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`to launch a generic product. Before a generic drug can be sold in the United States, the U.S. Food
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`& Drug Administration (“FDA”) requires manufacturers to perform testing to establish that the
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`proposed generic drug is “bioequivalent” to the branded drug.
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`6.
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`Publicly, Defendants claimed they welcomed generic competition, calling it a
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`“great thing.” But in private, Defendants blocked competitors from performing generic testing
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`through contractual restrictions that forbade distributors and other purchasers from selling
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`Daraprim to generic companies. These resale restrictions, the purpose and scope of which
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`Defendants repeatedly misrepresented, prevented would-be generic entrants from obtaining the
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`Daraprim samples they needed to perform FDA-required bioequivalence testing.
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`7.
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`Defendants also ensured that their competitors would lack the necessary ingredients
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`to manufacture generic Daraprim. Generic companies typically do not synthesize the active
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`pharmaceutical ingredients (“API”) used in their products, but rather purchase the API from
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`specialty manufacturers. Defendants therefore worked to corner the market for pyrimethamine, the
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`API needed to manufacture Daraprim, to cut-off generic companies’ access.
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`8.
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`Defendants first entered into a lucrative exclusive supply agreement with Fukuzyu
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`Pharmaceutical Co., Ltd. (“Fukuzyu”), then the only supplier approved by the FDA to manufacture
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`pyrimethamine in the U.S. Later, when Defendants learned that RL Fine Chem. Pvt. Ltd. (“RL
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`Fine”), another specialty supplier, was working with generic companies
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`to develop
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`pyrimethamine, Defendants negotiated an exclusive supply agreement with RL Fine, despite
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`already having locked-in Fukuzyu.
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`9.
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`Third, Defendants denied generic suppliers access to the sales data that was critical
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`to determining whether developing generic Daraprim would be commercially viable. Generic
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`companies acquire such data from third-party data-reporting companies that collect and aggregate
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`sales information from the marketplace. Defendants imposed “data-blocking” agreements that
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`prevented their distributors from selling Daraprim sales information to the data-reporting
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`companies, thereby preventing Defendants’ would-be competitors from accurately assessing, and
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`thus pursuing, the market opportunity for generic Daraprim.
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`10.
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` Defendants sought to conceal their scheme through deception and fraud. They
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`publicly denied their efforts to exclude generic competition, misrepresented the scope and purpose
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`of their sale and distribution restrictions on Daraprim, and claimed what little was known about
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`their scheme was necessary to serve patients’ interests. None of their claims were truthful.
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`11.
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`The purpose and effect of Defendants’ scheme has been to unlawfully monopolize
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`the U.S. market for Daraprim by excluding lower-priced generic competition, with the goal of
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`extracting monopoly profits at the expense of Daraprim customers.
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`12.
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`Absent Defendants’ anticompetitive and deceptive conduct, multiple generic
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`competitors would have entered the Daraprim market sooner and at lower prices, rendering
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`Defendants’ price hike unsustainable—such that they would not have pursued it in the first place.
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`13.
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`By instead planning to thwart generic entry from the start, Defendants determined
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`they could impose monopoly prices and reap significant profits at the expense of Plaintiff and
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`Class members, who were forced to pay inflated prices in violation of the federal antitrust laws,
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`various state antitrust and consumer protection laws, and the common law of unjust enrichment.
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`II.
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`Jurisdiction and Venue
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`14.
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`This Court has jurisdiction over the subject matter of this action pursuant to
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`Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26, Sections 1 and 2 of the Sherman
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`Antitrust Act, 15 U.S.C. §§ 1 and 2, and 28 U.S.C. §§ 1331 and 1337. This Court has subject
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`matter jurisdiction over the state law claims pursuant to 28 U.S.C. §§ 1332(d) and 1367, because
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`this is a class action in which the matter or controversy exceeds $5,000,000, exclusive of interest
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`and costs, and in which some members of the proposed Classes are citizens of a state different
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`from some Defendants. This Court’s exercise of supplemental jurisdiction over Plaintiff’s state
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`law claims would avoid unnecessary duplication and multiplicity of actions, and should be
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`exercised in the interests of judicial economy, convenience, and fairness.
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`15.
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`Venue is proper in this District pursuant to Section 12 of the Clayton Act, 15 U.S.C.
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`§ 22, and 28 U.S.C. §§ 1391 (b), (c), and (d), because a substantial part of the events giving rise to
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`Plaintiff’s claims occurred in this District, a substantial portion of the affected interstate trade and
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`commerce discussed below has been carried out in this District, and one or more Defendants reside,
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`are licensed to do business in, are doing business in, had agents in, or are found or transact business
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`in this District.
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`16.
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`This Court has personal jurisdiction over Defendants because each has the requisite
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`constitutional contacts with the state of New York due to their domicile, extent of their business
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`transactions within New York, contracts to supply goods and services in New York, soliciting
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`business in New York, and/or committing illegal acts as alleged herein within the state of New
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`York, pursuant to N.Y. C.P.L.R. §§301, 302.
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`17.
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`The Federal Trade Commission (“FTC”) along with the Attorneys General of
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`California, Illinois, North Carolina, New York, Ohio, Pennsylvania, and Virginia have initiated an
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`Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 6 of 128
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`enforcement action in this District against Defendants for the conduct alleged herein. See FTC v.
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`Vyera Pharma, LLC, No. 1:20-cv-0706 (S.D.N.Y). The amended complaint in that action is
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`referred to herein as the “Government Complaint.”
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`III. The Parties
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`A.
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`18.
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`Plaintiff
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`Plaintiff Blue Cross of Minnesota is a non-profit health service plan corporation
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`organized under the laws of Minnesota with its principal place of business in Minnesota. During
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`the Class Period, Defendants’ anticompetitive and deceptive conduct caused Plaintiff to pay for
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`and/or reimburse purchases of Daraprim at artificially inflated prices.
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`B.
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`19.
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`Defendants
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`Defendant Vyera Pharmaceuticals, LLC, (“Vyera”) is a privately-held, for-profit
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`limited liability corporation incorporated in Delaware with its principal place of business in New
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`York, New York. Vyera is a wholly owned subsidiary of Phoenixus AG. Vyera is registered with
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`the FDA as the owner of the Daraprim New Drug Application (No. 008578). Vyera was formerly
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`known as Turing Pharmaceuticals LLC. Vyera purchases Daraprim from Phoenixus and then
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`markets and distributes the product throughout the United States, including in this District.
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`20.
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`Defendant Phoenixus AG (“Phoenixus”) is a privately-held, for-profit Swiss
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`corporation with its principal place of business in Baar, Switzerland. Phoenixus is engaged in the
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`manufacture and distribution of Daraprim. Phoenixus acquired the rights to market and distribute
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`Daraprim in the United States in August 2015 and designated Vyera as the exclusive U.S.
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`distributor. Phoenixus is responsible for the manufacture and warehousing of Daraprim and sells
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`the product to Vyera for distribution in the United States, including in this District.
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`Defendants Phoenixus and Vyera have operated and continue to operate as a
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`21.
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`common enterprise while engaging in the illegal acts alleged below. Defendants have engaged in
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`this conduct as interrelated companies that share directors, officers, employees, business functions,
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`and office locations. Phoenixus has only five direct employees and largely operates through Vyera,
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`which has more than 50 employees. The current CEO of Phoenixus, Averill Powers, is also Vyera’s
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`top executive and general counsel and works out of Vyera’s New York office. Phoenixus’s few
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`Switzerland-based employees perform functions for Vyera. Phoenixus’s board of directors
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`controls Vyera, which has no board. Vyera accounts for a substantial percentage of Phoenixus’s
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`revenues. Unless otherwise specified, this Complaint refers to Vyera and Phoenixus collectively
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`as “Vyera” when discussing their joint conduct relating to Daraprim.
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`22.
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`Defendant Martin Shkreli (“Shkreli”) is the founder of Phoenixus and Vyera, the
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`largest shareholder and former chairman of the board of Phoenixus, and the former CEO of Vyera.
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`At all times material to this Complaint, acting alone or in concert with others, Shkreli has
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`formulated, directed, controlled, had the authority to control, or participated in the acts and
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`practices set forth in this Complaint. Shkreli resided in this District until his federal incarceration
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`for securities fraud in 2017. While incarcerated, Defendant Shkreli has continued to direct
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`Defendants’ operations, communicating with Vyera executives and Phoenixus’s board of
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`directors, including Defendant Mulleady, via a contraband cellphone and email and telephone
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`services managed by the Bureau of Prisons. In connection with the conduct alleged herein, he
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`transacts or has transacted business in this District and throughout the United States.
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`23.
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`Defendant Kevin Mulleady (“Mulleady”) is the current chairman of the Phoenixus
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`board of directors and former CEO of Vyera. At all times material to this Complaint (with the
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`exception of a brief period from early 2016 until June 2017), acting alone or in concert with others,
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`he has formulated, directed, controlled, had the authority to control, or participated in the acts and
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`practices set forth in this Complaint. Mulleady resides in this District and, in connection with the
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`matters alleged herein, he transacts or has transacted business in this District.
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`IV.
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`Interstate Trade and Commerce
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`24.
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`From August 7, 2015 through at least March 2020, Defendants were the sole
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`provider of Daraprim in the United States. At all material times, Defendants manufactured and
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`sold Daraprim, directly or through one or more of their affiliates, throughout the United States and
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`in this District, in a continuous and uninterrupted flow through interstate commerce.
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`25.
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`By inflating, maintaining, or artificially stabilizing the price for Daraprim,
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`Defendants deprived purchasers of Daraprim of the benefit of free and open competition, and thus
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`had a direct, substantial, and reasonably foreseeable effect on interstate commerce within the
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`United States, as well as intrastate commerce within each state.
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`26.
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`Such effects, including the inflated prices that Plaintiff and members of the
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`proposed Classes paid for Daraprim during the Class Period, caused antitrust injury in the United
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`States, and give rise to Plaintiff’s antitrust and consumer protection claims, and claims for unjust
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`enrichment.
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`V.
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`Regulatory Framework
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`27.
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`The Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., as amended
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`by the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman
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`Act”) and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, 21
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`U.S.C. §§ 355(b)(2) and 355(j) and 35 U.S.C. § 271(e), establishes procedures designed to
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`facilitate competition from lower-priced generic drugs.
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`28. When a generic drug first comes to market, it typically is sold at a 20 to 30 percent
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`discount to the branded product. As additional generic products come to market, price competition
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`drives generic prices down to as low as 85 to 90 percent below the brand price, typically in a short
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`timeframe.
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`29.
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`Because of these lower prices, patients and end-payers often seek to substitute AB-
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`rated generic drugs for their branded counterparts. All 50 states and the District of Columbia have
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`drug substitution laws that encourage and facilitate generic substitution. As a result, AB-rated
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`generic drugs typically capture over 80% of a branded drug’s sales within the first six months of
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`entering the market.
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`30.
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`To market a new, brand-name drug in the United States, a company must file a New
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`Drug Application (“NDA”) with the FDA demonstrating that the new product is safe and effective.
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`31.
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`A company seeking to market a generic version of an approved branded drug may
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`file an Abbreviated New Drug Application (“ANDA”) with the FDA, referencing the NDA for the
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`branded drug. The ANDA applicant is required to show that its generic product is therapeutically
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`equivalent to the reference drug. If the FDA agrees that two drugs are therapeutically equivalent,
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`it will assign the generic drug an “AB” rating and will allow the generic company to rely on the
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`studies submitted with the reference drug’s NDA to establish that the generic is safe and effective.
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`21 U.S.C. § 355(j)(2)(A)(iv).
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`32.
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`To establish that the generic drug is therapeutically equivalent to the branded drug,
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`the ANDA applicant must demonstrate “bioequivalence,” meaning there is no significant
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`difference in the rate and extent to which the drug’s active ingredient becomes available in the
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`body. To perform the bioequivalence testing needed to satisfy this requirement, the applicant must
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`acquire substantial samples of the branded drug.
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`The ANDA applicant must conduct both in vivo and in vitro bioequivalence testing.
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`33.
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`For in vivo testing, human subjects sequentially take the two products and the drug’s
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`pharmacokinetic performance is measured through bloodwork. The in vitro testing compares the
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`rate and extent to which the branded and generic drugs form a solution from their original dosage
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`form (e.g., tablet or capsule) when dissolved.
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`34.
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`The ANDA applicant must perform each of the required tests five times, which
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`requires it to obtain substantial quantities of the branded drug. A generic manufacturer may need
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`up to 5,000 doses of the branded drug to conduct bioequivalence testing, and all of the samples
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`must come from the same manufacturing lot to assure uniform character and quality. It is the
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`standard practice in the pharmaceutical industry for ANDA applicants to obtain the necessary
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`samples through normal, commercial distribution channels.
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`35.
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`In addition to samples, ANDA applicants must also have access to an approved
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`source of the drug’s API, the essential ingredient that makes the drug effective for its approved
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`use. Generic drug manufacturers typically acquire API from specialty third-party suppliers. An
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`API may be used in a pharmaceutical product only if the FDA has separately approved the API
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`product itself, the API manufacturing process, and the API manufacturer’s facility, quality
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`controls, and compliance with good manufacturing practices. Therefore, an ANDA must include
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`extensive information about the API and its manufacturer, including a complete description of the
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`manufacturing process and quality controls. The FDA reviews this information in detail and
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`usually will audit the API manufacturer and its facility regardless of location.
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`36.
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`An ANDA applicant can bypass much of this time-consuming and expensive
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`process by purchasing API from a supplier whose Drug Master File (“DMF”) the FDA already has
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`approved. An ANDA applicant intending to use that supplier can reference the DMF in its ANDA,
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`thus avoiding the expense and delay of working with a new supplier to obtain FDA approval of its
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`API manufacturing process.
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`VI.
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`Factual Allegations
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`A.
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`37.
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`Toxoplasmosis and Daraprim
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`Toxoplasmosis is a disease that results from infection with the toxoplasma gondii
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`parasite, typically transmitted through undercooked meat, infected cat feces, or exposure to
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`infected animals or birds. Most people are able to stave off toxoplasmosis by their own immune
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`systems. In many cases, the disease is asymptomatic.
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`38.
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`Yet for people with compromised immune systems—namely those with
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`HIV/AIDS, cancer patients, and recipients of organ transplants—toxoplasmosis can lead to
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`potentially fatal infections of the brain, lungs, heart, and other organs. Additionally, a pregnant
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`mother can pass on the toxoplasma gondii parasite in utero, causing congenital toxoplasmosis,
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`which left untreated can lead to blindness, severe intellectual disabilities, and other neurological
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`problems in children.
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`39.
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`The number of toxoplasmosis cases requiring treatment each year in the U.S. is
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`relatively small—less than 7,000 per year from 2003-2012. Those numbers have declined as the
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`treatment of HIV/AIDS has improved.
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`40.
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`Pyrimethamine is the preferred treatment for toxoplasmosis and has been endorsed
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`by the Centers for Disease Control and Prevention, the National Institute of Health, and the World
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`Health Organization. Other, non-pyrimethamine pharmaceutical products are not regarded as
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`reasonable substitutes for pyrimethamine, which is considered the “gold standard” treatment.
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`Guidelines from U.S. government health authorities identify pyrimethamine as “the most effective
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`drug against toxoplasmosis” and advise using other options only when pyrimethamine is
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`“unavailable or there is a delay in obtaining it.” Many doctors are “at a loss to think of an
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`appropriate alternative to pyrimethamine.”
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`41.
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`Non-FDA-approved
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`pyrimethamine
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`products,
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`such
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`as
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`compounded
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`pyrimethamine, are not appropriate substitutes for FDA-approved pyrimethamine either. Most
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`doctors have serious safety concerns about compounded products because they are not FDA
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`approved and have not been proven safe and effective. Additionally, federal law imposes
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`significant restrictions on how compounded pharmaceuticals are sold, which restricts their
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`availability to patients.
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`42.
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`Toxoplasmosis is typically diagnosed in hospitals, where patients often remain
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`hospitalized for two to three weeks. Daraprim is available only as a 25-milligram tablet. The initial
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`starting dosage for adults is 50 to 75 milligrams, or two to three tablets, per day. Toxoplasmosis
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`patients typically continue to take pyrimethamine at half-dosage for a few weeks after being
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`discharged, though some patients must remain on pyrimethamine indefinitely to prevent
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`recurrence.
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`43.
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`The FDA first approved a branded version of pyrimethamine, Daraprim, in 1953.
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`From its approval until 2010, GSK and its predecessors owned the worldwide rights to Daraprim,
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`which has long since lost any patent or regulatory protections.
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`44.
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`In 2010, GSK sold its U.S. and Canadian Daraprim rights to CorePharma LLC,
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`which then transferred the product to its sister company, Amedra Pharmaceuticals LLC. At the
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`time, GSK was selling Daraprim for around $1 per tablet, which generated annual revenues of less
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`than $1 million. GSK still sells Daraprim in the United Kingdom, where it charges less than $1 per
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`tablet. CorePharma and Amedra gradually increased Daraprim’s price to $13.50 per tablet.
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`In March 2015, Impax Laboratories, Inc. acquired the rights to Daraprim as part of
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`45.
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`its acquisition of Amedra’s parent company. Impax increased Daraprim’s price to $17.50 per
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`tablet, but rejected a more aggressive price increase because of its potential impact on the HIV-
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`AIDS community.
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`B.
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`Vyera’s Acquisition of Daraprim and Its Plan to Monopolize the Daraprim
`(Pyrimethamine) Market
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`46.
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`Vyera was founded in 2014 with a specific scheme in mind: to acquire a
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`pharmaceutical drug, grossly inflate its price, and insulate it from price competition to extract
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`monopoly profits. The goal of this scheme, in the words of the U.S. Senate Special Committee on
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`Aging, was to “exercise de facto monopoly pricing power, and then impose and protect
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`astronomical price increases.”
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`47.
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`To do so, Vyera searched for a sole-source drug like Daraprim that it could withhold
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`from competitors through a restricted distribution system. Vyera also began searching for
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`distributors that would “help [it] keep a tightly controlled supply chain, where [the] drug is only
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`supplied to verified patients.”
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`48.
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`In April 2015, Vyera offered to purchase the U.S. rights to Daraprim from Impax,
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`which assessed Daraprim’s net present value at $17.1 million, assuming no generic entry. After
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`months of negotiations, Vyera acquired the U.S. rights to Daraprim for $55 million in August
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`2015—more than three times Impax’s assessed net present value and more than eleven times
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`Daraprim’s annual net revenues at the time.
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`49.
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`Vyera was willing to pay this premium because, from the start, it planned to
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`transform Daraprim into an ultra-expensive, immensely profitable drug by unlawfully shielding it
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`from price competition. As an initial step in its scheme, Vyera increased the price per tablet of
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`Daraprim from $17.50 to $750 the day after it closed the deal—an astronomical increase of more
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`than 4,000%.
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`50.
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`Shkreli, Vyera’s then-CEO, believed that “nobody will notice and there will not be
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`any consequence.” In fact, the opposite occurred: patients, health care providers, scholars, and
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`lawmakers roundly denounced Vyera’s price increase, generating a swift backlash. The HIV
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`Medicine Association of the Infectious Diseases Society of America condemned the price increase
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`as “unjustifiable for the medically vulnerable patient population in need of this medication and
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`unsustainable for the health care system” generally. Even Vyera’s former general counsel
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`described the price increase as “not justifiable” and “unethical.”
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`51.
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`Defendants would not have imposed the price increase—because they knew that
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`such a breathtaking price increase would be unsustainable—unless they could block generic
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`competition. Because Daraprim’s patent protection had expired decades earlier, Defendants rightly
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`feared that generic companies would enter the market in response to the price increase and offer
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`generic pyrimethamine at lower prices.
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`52.
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`To cover their tracks, Defendants assured the public that they welcomed generic
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`competition. Defendants explained that their goal was to expand, not limit, the availability of
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`toxoplasmosis treatments and that generic companies would still have access to Daraprim.
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`Defendants further claimed that they purchased and raised the price of Daraprim to benefit patients
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`and to save the drug from “being put out of business.” As such, Defendants pledged to put all
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`profits from Daraprim “back in the patients’ hands” by investing in research for better treatments
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`for toxoplasmosis, while easing the distribution restrictions they inherited from Impax.
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`53.
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`All of these claims were false, fraudulent, and purposefully deceptive. In reality,
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`Defendants schemed to enrich themselves and maintain their monopoly by preventing generic
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`Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 15 of 128
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`competition. Defendants constructed a web of agreements at virtually every level of the
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`distribution chain to impede competitors from developing generic Daraprim. This included: (1)
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`prohibiting distributors and downstream purchasers from reselling Daraprim to generic companies;
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`(2) exclusive supply contracts with API manufacturers that denied potential generic competitors
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`access to pyrimethamine; and (3) data-blocking agreements that prevented distributors from selling
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`the Daraprim sales data that would have helped generic competitors assess a generic product’s
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`commercial viability.
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`VII. Defendants’ Anticompetitive Conduct
`
`A.
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`54.
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`Defendants Prohibit Resale of Daraprim to Block Generic Entry
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`For more than 60 years, Daraprim had been distributed openly and without
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`restrictions in the United States. This meant that a generic company could purchase Daraprim at a
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`local pharmacy without having to negotiate contracts or receive special approval.
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`55.
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`Defendants understood that if they sharply raised the price of Daraprim,
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`competitors could obtain the samples they needed to develop a generic product. Defendants
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`therefore sought to cut off that access by subjecting Daraprim to a tightly restricted distribution
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`system, one that went far beyond what Vyera inherited from Impax, and which was fundamental
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`to their plan to increase Daraprim’s price.
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`56.
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`This was not the first time Shkreli had used resale restrictions to block generic
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`competition. In 2014, Shkreli directed his first pharmaceutical company, Retrophin Inc., to acquire
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`the rights to another rare drug, Thiola, raise its price by 2,000 percent, and impose a restricted
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`distribution system. Shkreli explained to Retrophin’s investors that “[t]he closed distribution
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`system . . . allows for us to control the release of our product. We do not sell Retrophin products
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`
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`Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 16 of 128
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`to generic companies.” In Shkreli’s words, cutting-off generic companies’ access to drug samples
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`“takes the AB substitutable rating that generics rely on and neuters it.”
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`57.
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`Once at Vyera, Defendant Mulleady stated privately that Vyera’s “#1 priority”
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`would be establishing a similar restricted distribution system for Daraprim; doing so was
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`“exceptionally time sensitive;” and that Vyera employees should “work extra long hours to get
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`this done.”
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`58.
`
`Vyera covertly executed this plan once it acquired Daraprim. Vyera expanded the
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`number of distributors for logistical reasons and imposed aggressive new resale restrictions that
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`barred distributors, hospitals, and pharmacies from reselling Daraprim to generic companies. This
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`prevented generic companies from purchasing Daraprim at any point in the distribution chain, and
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`thus blocked them from performing the bioequivalence testing required for FDA approval.
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`Defendants meanwhile engaged in a deceptive public relations campaign to conceal their actions.
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`1.
`
`Vyera prohibits distributors from selling Daraprim to generic
`companies
`
`59.
`
`To prevent generic companies from obtaining the samples necessary for
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`bioequivalence testing, Vyera’s distribution agreements only allow distributors to sell Daraprim
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`to specifically identified customers or customer types. To sell Daraprim to anyone else, multiple
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`levels of distributors need Vyera’s express approval. If a distributor receives an order from a
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`suspected generic company or its agent, Vyera will “block that purchase” to “avoid generic
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`competition.”
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`60.
`
` Vyera’s distribution system begins when its contract manufacturer delivers
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`Daraprim to Vyera’s third-party logistics provider ICS (formerly Smith Medical Partners). ICS
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`then warehouses the Daraprim and ships it to Vyera’s authorized distributors. Vyera’s agreement
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`with ICS allows ICS to ship Daraprim only to four distributors: ASD Healthcare, BioRidge
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`Case 1:21-cv-01884 Document 1 Filed 03/04/21 Page 17 of 128
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`Pharma, LLC, Optime Care Inc., and, upon information and belief, Cardinal Health. ICS is
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`prohibited from selling Daraprim to other distributors without Vyera’s express approval.
`
`61.
`
`Each of the four authorized distributors that obtain Daraprim from ICS may then
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`only sell Daraprim to specific types of purchasers. Vyera contracts with ASD Healthcare to
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`distribute Daraprim to hospital and government purchasers; with BioRidge Pharma to distribute
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`Daraprim to certain identified specialty pharmacies; with Optime Care to distribute Daraprim only
`
`to “[a]uthorized customer types,” like hospitals, government customers, state AIDS Drug
`
`Assistance Programs, and patients with a prescription; and with a fourth distributor, upon
`
`information and belief, Cardinal Health, to “approved classes of trade,” which are defined as
`
`“[h]ospitals, state AIDS Drug Assistance Programs (ADAPs), and their authorized purchasers.”
`
`62.
`
`Each of these distribution agreements prohibits Vyera’s distributors from selling
`
`Daraprim to generic companies without Vyera’s express approval, which it never provides. Vyera
`
`has rejected every request from a distributor to sell Daraprim to a purchaser that it suspected might
`
`be a generic company or its agent, despite the fact that sales of Daraprim at list price would be
`
`profitable to Vyera. The purpose and effect of these distribution restrictions is to block generic
`
`companies from purchasing the Daraprim samples they need to perform the bioequivalence studies
`
`required by the FDA.
`
`2.
`
`Vyera prohibits downstream purchasers from selling Daraprim to
`generic companies
`
`63.
`
`Vyera also took steps to ensur