Blue Cross of Minnesota to settle with Martin Shkreli's former drug company

A drug company once led by a brash young executive nicknamed "Pharma bro" would pay up to $28 million to health insurers including Blue Cross and Blue Shield of Minnesota under terms of a lawsuit settlement the Eagan-based carrier announced Monday.

The settlement was submitted Friday and is pending approval in the federal District Court of the Southern District of New York.

Blue Cross of Minnesota in March filed a class-action lawsuit alleging anti-competitive practices by the drug company — now known as Vyera Pharmaceuticals LLC — when it imposed a huge price hike for a critical medicine called Daraprim used to treat a life-threatening parasitic infection.

"The [class-action lawsuit] alleges that defendants engaged in a scheme to thwart generic competition for Daraprim in violation of ... the Sherman Act and various state antitrust, unjust enrichment, and consumer protection laws," states a proposed settlement notice to third-party payors that was filed with the court. "Defendants deny any wrongdoing and liability. They agreed to the settlement to resolve the controversy and to avoid the burden and expense of further litigation."

Defendants include Martin Shkreli, former chief executive of the company once known as Turing Pharmaceuticals. In its lawsuit, Blue Cross alleged the drug company raised the price of Daraprim by 4,000% — from $17.50 to $750 per pill. Patients typically take multiple doses of the medication per day and treatment can last weeks or months, the insurer said.

"Blue Cross and Blue Shield of Minnesota believes that drug companies need to be held accountable for the uncontrollable rise of prescription drug costs," Dana Erickson, the insurer's president and chief executive, said Monday in a statement. "We look forward to finalizing this settlement in the courts so that funds may be distributed appropriately to impacted members of the class."

In 2016, when Shkreli was 32, the former CEO outraged a congressional committee during and after a hearing where he appeared to smirk repeatedly while refusing to answer questions about his company's alleged business practices. He defended the markups as justified by capitalism and at one point suggested that he should have raised the price even higher.

Earlier this month, in a case brought by the Federal Trade Commission and seven states, a federal judge ruled that Shkreli must return $64.6 million in profits he and his former company received through the price hikes. The judge also barred Shkreli, who is serving a prison sentence for securities fraud in an unrelated case, from working in the pharmaceutical industry.

In the lawsuit led by Blue Cross of Minnesota, Shkreli is a defendant along with Vyera Pharmaceuticals, parent company Phoenixus AG and former executive Kevin Mulleady.

It's not yet clear how much money Blue Cross might receive through the settlement process. Under the proposed terms, third-party payors would receive reimbursement for some or all of the purchase price of Daraprim between Aug. 7, 2015, and Jan. 28, 2022.

Blue Cross called Daraprim the "gold-standard treatment" for toxoplasmosis, a parasitic infection that can be fatal for people with compromised immune systems. The infection is particularly dangerous for HIV/AIDS and cancer patients.

The drug was first brought to market in the U.S. in 1953 and was affordable for "many decades," the insurer's lawsuit states.

"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," Blue Cross alleged in the lawsuit. "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 anticompetitive conduct."