Blue Cross of Minnesota lawsuit takes aim at 'Pharma bro'

Blue Cross and Blue Shield of Minnesota has filed a class-action lawsuit alleging anti-competitive practices that let a drug company impose a huge price hike for a critical medicine used to treat a life-threatening parasitic infection.

Defendants include Martin Shkreli, the former drug company leader who came to be known as "Pharma bro" after news broke about how his company, Turing Pharmaceuticals, boosted the price of a drug called Daraprim.

At age 32, Shkreli engendered the wrath of a congressional committee during and after a 2016 hearing, where he appeared to smirk repeatedly while refusing to answer questions about his company's alleged business practices.

In a lawsuit filed Thursday in federal court in New York, Eagan-based Blue Cross alleges the company now known as Vyera Pharmaceuticals LLC used its power in 2015 to raise the drug's price by 4,000% — from $17.50 to $750 per pill. Patients typically take multiple doses of Daraprim per day and treatment can last weeks or months, Blue Cross said Thursday in a news release about the legal filing.

The health insurer claims that Vyera maintained its monopoly by preventing rival generic drug companies from acquiring samples and ingredients needed to develop alternatives.

"Drug companies need to be held accountable for their role in making sure health care costs are sustainable for all," said Dr. Craig Samitt, the chief executive at Blue Cross of Minnesota, said in a statement.

Vyera did not immediately respond to an e-mail seeking comment.

The effects of the alleged behavior continue today, since only one generic drug manufacturer has entered the market to bring price competition, said Kellie Lerner, an attorney with Robins Kaplan LLP who's representing Blue Cross of Minnesota. She said she wasn't sure of the current price for Daraprim, but alleged it's higher than might be expected with typical competition among generic manufacturers.

Lerner did not provide figures for the amount Blue Cross of Minnesota paid in claims for the medicine.

In 2020, the New York Attorney General's Office and the Federal Trade Commission sued Shkreli and his former company, alleging they illegally sought to maintain their monopoly and took action to thwart potential competitors.

The new lawsuit says it "challenges defendants' scheme to monopolize the U.S. market for Daraprim — an essential, lifesaving drug used in the treatment of toxoplasmosis — through an array of anti-competitive conduct that successfully thwarted generic competition for years and continues to cause supra-competitive prices to this day."

"Because Daraprim lacked patent and regulatory protections, defendants understood that such an astronomical price increase would cause competitors to develop generic versions of Daraprim and sell them at lower prices," the lawsuit states.

"To prevent this, and to make their planned price increase commercially viable, defendants executed a scheme to thwart generic competition and force Daraprim purchasers to pay grossly inflated prices — all while concealing and misleading the public about their anti-competitive conduct."

The lawsuit said Vyera is a wholly owned subsidiary of Phoenixus AG, which is named as a defendant as well, along with the current chairman of Phoenixus.

The Associated Press reported in January that Shkreli lost his bid for an early prison release.

He is serving a seven-year prison sentence for a 2017 conviction for lying to investors about the performance of two hedge funds he ran.

The lawsuit from Blue Cross of Minnesota alleges that "while incarcerated, defendant Shkreli has continued to direct Defendants' operations, communicating with Vyera executives and Phoenixus's board of directors ... via a contraband cellphone and e-mail and telephone services managed by the Bureau of Prisons."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck