Mylan NV’s latest troubles couldn’t come at a worse time.
Two years ago, Mylan was a swaggering drugmaker on the way up, buying up rivals as it grew and diversified.
Then it faced political scrutiny over price hikes for its EpiPen allergy shot and increasing pressure on prices for the generic drugs that are the company’s backbone. In August, Mylan cut its 2018 outlook, and on Tuesday came another blow: Its No. 2 executive was one of the first two top managers accused in an industrywide civil investigation of colluding in a “sinister” conspiracy to prop up prices.
After reaching an all-time high of $76.06 in April 2015, the shares have been cut in half and closed Tuesday at $35.71, dropping 6.6 percent for the day.
Like other drugmakers, Mylan has been under increasing pressure from regulators at the U.S. Food and Drug Administration in the past year. Taking up President Donald Trump’s call to reduce drug prices, the FDA has said it will accelerate the approval of copycat drugs that will push prices down further. The agency has said it will specifically target drugs where there are only a few generic competitors, trimming the industry’s already thin margins further.
The multiyear civil case against Mylan and 17 other makers of generic pills — with a dragnet that could wrap in other senior drug executives around the industry — could prove damaging. Not only does it target Mylan President Rajiv Malik, but the alleged conduct in the complaint supposedly helped generic-drug makers preserve their margins and markets, avoiding some of the competition that has already been pressuring the industry.
In their 243-page new complaint, the states described how more than a dozen drugmakers worked together to share the market and avoid a “fight to the bottom.” At industry conferences, over dinner parties and hundreds of phone calls, emails and text messages, executives would agree to raise or maintain prices for specific drugs in tandem, or delineate each company’s market share.
More to Come?
Malik is one of two senior drug executives named in the new complaint, in which 45 states and the District of Columbia are seeking to expand an earlier lawsuit alleging price and market fixing.
Mylan, which is also named as a defendant in the case, said it stands behind Malik and will “defend this case vigorously.” Malik’s lawyer, Robert Cleary of Proskauer Rose LLP, said in a telephone interview that the executive “emphatically and categorically denies the allegations in the complaint” and “is confident he will be completely vindicated.”
The complaint details numerous phone calls and emails between Malik and executives at closely held Indian drugmaker Emcure Pharmaceuticals Ltd. and its subsidiary, Heritage Pharmaceuticals, around the time when Heritage launched an antibiotic called Doxy DR. Mylan, then the only other generic maker with that pill on the market, agreed to give up two large accounts to Heritage, helping Heritage enter the market without putting pressure on prices, according to the filling.
“Given direct involvement of executives in this case and the evidence we had implicating them, we felt as a group of antitrust enforcers that it was important to hold these individuals accountable,” Connecticut Assistant Attorney General Joseph Nielsen said Tuesday on a conference call with reporters.
The civil investigation has run parallel to a criminal probe by the U.S. Justice Department that has so far led to guilty pleas from two former executives of Heritage, the Emcure subsidiary. The complaint has now expanded to 18 companies — from six — and 15 drugs.
Malik has worked at Mylan since 2007 and became president in 2012. Previously, he worked at Sandoz and at Ranbaxy Laboratories Ltd. One of Mylan’s senior-most executives, he’s a regular speaker on quarterly earnings calls. The company, which has a legal address in the Netherlands and is run from Canonsburg, Pennsylvania, describes him on its website as the leader of “all global commercial and operational activities.”
“Rajiv is easily one of the foremost generic heads out there and is a core part of Mylan leadership,” said Umer Raffat, an badyst with Evercore-ISI.
The troubles may not end at Mylan and Emcure. On the conference call Tuesday, Connecticut Attorney General George Jepsen suggested that other executives could be drawn in.
“Every time we kick a door in we make new discoveries,” Jepsen told reporters.