The Federal Trade Commission and its state co-plaintiffs, New York, California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia, filed an order in court today that shuts down an illegal scheme masterminded by ‘Pharma Bro’ Martin Shkreli that fleeced patients dependent on the life-saving drug Daraprim. The order follows a January 2020 complaint against Shkreli, his associate Kevin Mulleady, their company Vyera Pharmaceuticals, LLC, and its parent company Phoenixus AG. Enforcers alleged that Shkreli, currently in prison for securities fraud, and Mulleady hiked the price of Daraprim by 4000 percent and then concocted an elaborate web of restrictions to illegally block competitors from producing a cheaper option.
The order bans Mulleady from the pharmaceutical industry and requires Vyera and Phoenixus AG to provide up to $40 million in relief for victims. Shkreli, who allegedly pioneered the scheme as Vyera’s first CEO and continued to mastermind it from prison, is set to begin trial later this month.
“Today’s action puts money back in the pockets of drug patients fleeced by a monopolistic scheme,” said FTC Chair Lina M. Khan. “Martin Shkreli masterminded an elaborate plan to dramatically jack up the price of life-saving drug Daraprim by blocking cheaper options. While litigation against Shkreli continues, the order shuts down the illegal enterprise run by his companies, Vyera and Phoenixus, and bans his associate from the industry. This strong relief sets a new standard and puts corporate leaders on notice that they will face severe consequences for ripping off the public by wantonly monopolizing markets.”
The complaint alleges that Shkreli and Mulleady launched Vyera with a plan to purchase a life-saving drug, raise the price dramatically, and use anticompetitive contracts to block competition. Vyera acquired Daraprim in 2015 and immediately raised the list price from $17.50 to $750 per tablet. According to the complaint, Vyera then created a web of anticompetitive restrictions to box out the competition: it entered resale-restriction agreements with distributors that prevented generic companies from procuring the drug for FDA-mandated testing; it entered exclusivity agreements with the suppliers of a critical input known as pyrimethamine API; and it inked data-blocking agreements with two key distributors to prevent them from releasing Daraprim sales data and thereby mask the true size of the market opportunity for potential generic competitors. The complaint alleges that this scheme delayed generic competition for years and caused tens of millions of dollars in harm to consumers.
Upon the federal district court’s entry of the stipulated order, Mulleady will generally be banned from working for, consulting for, or controlling a pharmaceutical company for 7 years. Mulleady is also subject to a $250,000 suspended judgment if he is found to have violated the terms of this order.
The order requires Vyera and Phoenixus to pay up to $40 million total in equitable monetary relief – $10 million is guaranteed up front and up to $30 million more is payable over 10 years if the companies’ financial condition improves. Vyera and Phoenixus are required to make Daraprim available to any potential generic competitor at list price, and to provide prior notification of any planned pharmaceutical transaction valued at $25 million or more. Mulleady, Vyera, and Phoenixus also are prohibited for 10 years from engaging in any conduct similar to what the FTC and the states alleged in their amended April 2020 complaint.
With respect to every defendant except Shkreli, this settlement resolves all claims brought by the FTC and the state co-plaintiffs, as well as those brought in a related class action suit.
The Commission vote authorizing staff to seek entry of the Stipulated Order for Permanent Injunction in the U.S. District Court for the Southern District of New York was 4-0. On Dec. 7, 2021, the order was filed by staff and entered by the court. Commissioner Noah Joshua Phillips issued a statement.