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Mylan's President Targeted in Generic Drug Pricing Probe

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Mylan NV’s second-ranking executive was named in a civil investigation by dozens of states conducting a multiyear probe into alleged price collusion by makers of generic drugs that is now targeting senior managers.

State attorneys general said they’re seeking to sue Rajiv Malik, Mylan’s president and executive director, as part of an expanded complaint against pharmaceutical companies from 45 states and the District of Columbia, according to a statement by Connecticut Attorney General George Jepsen.

Malik would be the first senior executive from a major drugmaker sued in the case. The states’ complaint, which is highly redacted, quotes extensively from conversations between employees at multiple companies describing how they manipulated prices and carved up markets. Mylan said it stands behind its president and will “defend this case vigorously.”

(Related: Drug Industry Lunacy: Who’s to Blame?)

The drugmaker’s shares fell as much as 9.2% in New York, the biggest intraday drop since February 2016.

“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 on a conference call with reporters. Other executives are under investigation and the conduct was “very widespread across the industry,” he said.

Connecticut and other states are asking a federal judge to allow them to add to their existing complaint against six drugmakers. They’re also seeking to add Satish Mehta, chief executive officer of closely held Indian drugmaker Emcure Pharmaceuticals Ltd., to the lawsuit.

“Mylan has deep faith in the integrity of its President, Rajiv Malik, and stands behind him fully,” the company said in a statement. Representatives for Emcure didn’t immediately respond to requests for comment.

“Mr. Malik emphatically and categorically denies the allegations in the complaint,” Malik’s lawyer, Robert Cleary, said in a phone interview. “He looks forward to representing his defense and is confident he will be completely vindicated.” Cleary specializes in white collar criminal defense at Proskauer Rose LLP, according to the firm’s website.

Drugmaker’s Troubles

The news couldn’t come at a worse time for Mylan. The drugmaker and other generics manufacturers have faced increasing price pressure on their products as the Food and Drug Administration has tried to push more competing pills on the market. The company has faced criticism in Washington over the price of its allergy shot EpiPen, and in August cut its long-held 2018 earnings-per-share target.

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 Pharmaceuticals Inc., a subsidiary of Emcure.

Led by Jepsen, the civil investigation is naming executives for the first time, as well as expanding the number of drugmakers in the probe to 18 from six, and the number of drugs to 15 from two, according to Jepsen. Previously, it had focused on an antibiotic and an oral diabetes medication, which it said executives had fixed prices on while meeting at trade shows, customer events and dinners.

Widening Lawsuit

The drugmakers that the states are seeking to add to the lawsuit include Apotex Inc., Dr. Reddy’s Laboratories Ltd., Lannett Co., Glenmark Pharmaceuticals Ltd., Endo International PLC’s Par Pharmaceutical unit, Novartis AG’s Sandoz unit, Sun Pharmaceutical Industries Ltd. and others. Mylan and Teva Pharmaceutical Industries Ltd. were among the drugmakers named in the earlier version of the suit.

“‘We allege in this complaint that the defendant companies’ collusion was so pervasive that it essentially eliminated competition from the market for these 15 drugs in its entirety,” Jepsen said in the statement. The result, he said, was higher costs for patients and states.

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.”

Drug prices have been subject to harsh scrutiny from U.S. lawmakers over the past two years, with executives from Mylan and Valeant Pharmaceuticals International Inc. appearing before congressional committees to explain steep increases.

–With assistance from Erik Larson and Jared S. Hopkins.

—Read Mylan to reduce EpiPen costs as political pressure mounts on ThinkAdvisor.

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