A wave of lawsuits against Reckitt Benckiser Group PLC, which makes the addiction treatment drug Suboxone, allege that the company gamed the regulatory system to keep prices high and violated state and federal antitrust laws.
The medication is an essential lifeline for opioid addicts trying to get clean. Near the end of 2010, Jamie Frank survived a heroin overdose, but it wasn’t the prospect of death that turned her around. “I was failing typography,” she says. “And it was my favorite. Not just my favorite class,” she clarifies, “but my favorite thing on earth. Fonts.”
Jamie was studying design at the University of the Arts in Philadelphia, her hometown. She sits in a cafe in Center City where a friend of hers forgot three months of her life after overdosing in the bathroom. “It’s nerdy and ridiculous, I know,” she says, “but I wanted to be a graphic designer just a teeny tiny bit more than a junkie.”
Jamie began taking Suboxone. When placed under the tongue, the drug dissolves and delivers its own mild opioid, buprenorphine, into the body. The drug soothes cravings and keeps withdrawal at bay. As a safeguard, Suboxone also contains an opioid blocker — naloxone — that kicks in should the patient dissolve the dose in solution and inject it for a high. (Suboxone is not a panacea; some dealers push the drug to addicts, creating a problematic secondary market.) But of the remedies out there, buprenorphine-naloxone coupled with group counseling and therapy is the most effective intervention to treat opioid addiction, according to a host of studies.
Jamie did it by the book. She started seeing a psychiatrist, got drug tested before receiving each prescription, and attended a 12-step program. “I went to Ivy League rehab,” she jokes. And she tapered off Suboxone and eventually graduated cum laude. “Not the best Latin honor,” she says, “but a good one.”
Plaintiffs in the suits against Reckitt say Jamie and thousands of other recovering addicts and their insurers paid too much for Suboxone prescriptions. Labor unions led the charge for class actions in August 2013, alleging that Reckitt had raised their members’ healthcare costs. In all, 10 class actions were filed in the Eastern District of Pennsylvania. Wisconsin Attorney General Brad Schimmel rallied 36 states to join a September 2016 lawsuit alleging that Reckitt siphoned taxpayer dollars via bloated Medicaid payouts for Suboxone. Those Medicaid purchases, according to a New York Times report, topped $857 million between 2009 and 2012.
Multiple studies indicate that many patients will simply forego prescriptions they cannot afford, risking their health. In the case of Suboxone, skipped doses bring on a marathon withdrawal: two months of crawling skin, intermittent anxiety, tears, and nausea. A Suboxone prescription typically runs $500 to $600 per month, according to addiction treatment counselors interviewed for this story. Those counselors pointed out that when taken as directed, buprenorphine-naloxone lowers opioid tolerance. The patient in withdrawal, perhaps unable to afford that $500 Suboxone script, could turn to $10 bag of heroin. If they do, they run an increased risk of death from overdose.
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The cost in human life is difficult to estimate. According to the Department of Health and Human Services, 2.5 million people need treatment for opioid addiction and about 1 million get it.
Reckitt did not respond to Tarbell’s request for comment for this story. Reckitt’s spin-off, Indivior PLC, which now owns Suboxone, said only that “Indivior does not comment on ongoing litigation.”
A review of court documents shows that the companies have yet to contest the factual underpinnings of the case against them. Wherever possible, Tarbell has attempted to verify the lawsuits’ claims against publicly available information.
A fortunate orphan
Reckitt brought Suboxone to market in 2002 as an “orphan drug.” Orphan drug designation carries exclusive selling rights to reward companies for marketing medicines that treat rare conditions and would otherwise make a poor return on research and development costs.
Reckitt, however, got much of that R&D for free. The federal government, through the National Institutes of Health, funded the bulk of the studies on buprenorphine-naloxone, feeding pills to human subjects and opioid “banana pellets” to rhesus monkeys. In 1992, it concluded that the medication mix was safer and more effective than methadone.
Suboxone’s potential to treat addiction won the drug its protected orphan status under the Drug Addiction Treatment Act of 2000, and because opioid addiction was not a “rare condition,” Suboxone earned big bucks, soon netting over $300 million per year.
By 2008, those profits were hurtling toward a cliff. The orphan status and its exclusive selling rights would expire in 2009, and Reckitt, by its own reckoning, stood to lose 80 percent market share to cheaper, generic versions of the buprenorphine-naloxone mix.
The company, which also owns Lysol spray and Durex condoms, sought to soothe shareholders, assuring them that it was searching “for ways to offset the impact of the loss . . . and any further erosion thereafter.”
As alleged by the lawsuits, Reckitt’s scheme to guard Suboxone profits deployed two tactics: stall and switch. The British titan of health and hygiene stymied the regulatory process while executing a “product hop”—the practice of tweaking a drug to extend exclusive rights—successfully delaying generics for almost four years while undermining the market they would inherit.
In its product hop, Reckitt went from Suboxone tablets to meltaway strips, little patent-protected squares that stick and vanish against the underside of the patient’s tongue.
The Food and Drug Administration initially balked at the strips and shuttled Reckitt into a “Risk Evaluation and Mitigation Strategies” (REMS) process to address child-safety concerns. The strips come with a sweetened lemon-lime tang; in a child’s mouth they have the potential to slow heartbeat and breathing with lethal results.
Reckitt completed the REMS while simultaneously using another REMS to buy time for its product hop. To ensure safe generics, the FDA requires that name brand producers share research with their soon-to-be competitors. A lawsuit from one of those competitors—Amneal Pharmaceuticals—alleges that Reckitt sabotaged the information exchange.
Over the course of three years, Reckitt dodged meetings, hoarded research, and torpedoed negotiations by insisting that the generics contractually absorb the name brand’s product liability, a cost-prohibitive non-starter, according to the suit. In 2012, Reckitt abandoned the process altogether.
By then, Suboxone meltaways were for sale and Reckitt took an axe to the market for tablets. According to lawsuits, Reckitt flooded prescribers with marketing for meltaways, rewarded sales reps for converting doctors from prescribing tablets to strips, and hiked the price of the tablets to $289.80—27 percent over the meltaway price, despite the strips’ higher manufacturing cost.
The hard sell worked. With generic tablets delayed, Reckitt’s meltaways—patent-protected until 2023—comprised 64 percent of Suboxone prescriptions. To kill off the remaining demand for the pills, Reckitt announced in September 2012 that it would discontinue tablets altogether, citing child safety as its reason.
Remember, Reckitt had just completed a REMS demonstrating that all Suboxone was child-proof; that proceeding had found that of the two Suboxone forms, kids were more likely to be get into to the meltaways. Nevertheless, Reckitt encouraged patients to “consult their physician about how to transition to Suboxone Film.”
Finally, Reckitt raised the pretext of child safety in a last ditch effort to stall the generics. On September 25, 2012, Tim Baxter, the company’s Global Medical Director and head of its Ethical Pharmaceutical Division, filed a “Citizen Petition.”
Citizen Petitions provide a mechanism for citizens and organizations to compel the FDA to investigate potential risks. These investigations typically warrant six months. The FDA rejected Baxter in three, an uncharacteristically swift denial.
In the rejection, Janet Woodcock, MD, the FDA’s Director of Drug Evaluation and Research, spent the better part of 17 pages citing Reckitt’s own evidence that ran contrary to the petition, and then closed on an ominous note. “The Agency,” she said, “has referred this matter to the Federal Trade Commission, which has the administrative tools and the expertise to investigate and address anticompetitive business practices.” That federal investigation is ongoing.
Facing big litigation, drug companies accused of product hopping often settle. Drug producer Warner Chilcott Ltd., a subsidiary of Israeli mega-producer Teva Pharmaceuticals Industries Ltd., has twice settled product hopping antitrust claims for $15 million each, first over Doryx, an antibiotic anti-acne medication, and then for Asacal, a colitis treatment. (These settlements, it’s worth noting, added up to less than .15 percent of Teva’s revenue of $22.4 billion in 2017.)
Plaintiffs accusing drug companies of product hopping to create illegal monopolies can win. Another Teva subsidiary, Actavis, found its product hop for Namenda, an Alzheimer’s treatment drug, halted by a Manhattan federal court. That case spurred a May 2015 ruling from the 2nd Circuit U.S. Court of Appeals, finding product hops that force patients into patent protected drugs while impeding generic competition violate the Sherman Antitrust Act, the century-old cornerstone of U.S. trust-busting law.
But it’s not an easy legal path. “Product hopping cases are complex . . . and antitrust cases are expensive to try and challenging to win,” says Robin Feldman, Director of the Institute for Innovation Law at the University of California Hastings and co-author of Drug Wars: How Big Pharma Raises Prices and Keeps Generics off the Market.
In going against drug companies, your best shot often lies with a jury, Feldman says.
“The key will be whether the lawyers can tell the story clearly and convincingly,” she says. “Particularly if the case ever reaches a jury, the question is always which can speak in a way that has the ring of truth.”
The states and class action plaintiffs are banking on it. They have asked the Philadelphia federal court for a jury to hear the tale of Suboxone.
One More Legal Maneuver
Facing federal investigation and a dozen massive lawsuits, Reckitt has deployed another tactic. It packaged its Suboxone operations into Indivior, a subsidiary, and the two “de-merged” in 2014. The lawsuits gunning for Reckitt quickly named the new company as a defendant, but Indivior found an exit from the litigation.
In October 2017, U.S. District Judge Mitchell Goldberg for the Eastern District of Pennsylvania rejected the states’ request to “pierce the corporate veil” and hold Indivior jointly responsible for Reckitt’s behavior. The two are separate, the judge ruled.
In arguing that they weren’t, the states asserted that Indivior is the “alter-ego” or “successor” to Reckitt’s buprenorphine business. All eleven members of Indivior’s inaugural executive team came directly from Reckitt. Eight of those members had a direct hand in Suboxone strategy in the U.S. market. Indivior, until very recently, bought all of its ingredients from Reckitt. Finally, Reckitt still holds the exclusive contract to manufacture all of Indivior’s Suboxone tablets.
Nevertheless, in creating Indivior, Reckitt successfully shifted its Suboxone operations into a corporate entity that is immune to the lawsuits. The mother ship remains on the hook for the current litigation.
The company still faces the scalpel of the FTC’s investigation, but according to the FTC, the British company has been less than compliant. In 2014, the FTC demanded approximately 28,000 documents for investigation. Reckitt has responded with a slow drip, filing multiple motions to protect those documents under “attorney-client privilege,” causing the FTC to drag the company before a Virginia federal judge at least three times in the past four years.
Meanwhile, back at Philadelphia federal court, Reckitt has challenged jurisdiction, discovery, and applicability of certain statutes. After all, it happened in public, in press releases, reports to shareholders and government filings. There remains, however, a shadowy region of information that is crucial to the cases: how much the scheme cost consumers as well as public and private insurers.
“It’s incredibly difficult to tease out,” says Robin Feldman. That’s because exactly how much drugs cost is confidential information. Analysts can make educated guesses, but they are guesses,” Feldman says. “Believe it or not, not even the insurers know.”
Drug companies use middlemen called pharmaceutical benefit managers, or PBMs, to deal with anyone who arranges drug benefits. That includes health insurers, employers that self-insure, unions, and the government. PBMs negotiate the purchasing contracts and layer them with clauses to shield information from drug purchasers.
“These contracts are protected as trade secrets,” Feldman says. “They cannot be revealed to anyone. Not insurance auditors, not Medicaid auditors. No one.”
Winning the Long Game
Whatever the fallout from these lawsuits, Reckitt’s legal and regulatory strategy appears to have worked. It transformed the patent cliff into a long and profitable slope. In the bland investor-ese of the company’s annual reports, the meltaways had worked to “mitigate the impact” of the “loss of exclusivity in the U.S.”
Reckitt’s exclusive rights to buprenorphine-naloxone ended in September 2009, yet generics didn’t hit pharmacy shelves until spring 2013. In that time Suboxone netted over $4.3 billion. And when they did hit, U.S. doctors were steering 68 percent of prescriptions for buprenorphine-naloxone towards Reckitt’s patented meltaways.
Since the lawsuits began alleging ill-gotten gains, Suboxone has brought in net revenue of approximately $5.8 billion.