Former Shkreli firm responsible for 5,000% drug hike sued
The drug company previously headed by Martin Shkreli was sued Monday for allegedly breaching a contract that let it sell Daraprim, the medication whose price the company marked up 5,000%, sparking nationwide criticism.
New York City-based Turing Pharmaceuticals neglected to provide and certify accurate pricing data for the drug and failed to assume responsibility for Medicaid rebate liability linked to the medication's sales, the federal lawsuit filed in New York by Impax Laboratories (IPXL) charged.
Impax, a California company that sold its Daraprim sale rights to Turing in August, also charged that Turing violated the agreement that it would "use best efforts not to do any act (that) endangers, destroys or similarly affects the value of the goodwill" of Impax's corporate name and trademarks.
Turing did not immediately respond to a message seeking comment on the allegations.
Daraprim is a medication used to treat toxoplasmosis, a potentially life-threatening parasitic illness that afflicts those with AIDS, cancer or other conditions that weaken the immune system. Turing's 2015 price hike on the decades-old drug last year under Shkreli's leadership raised the per-pill cost from $13.50 to $750.
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The price increase generated complaints from patients, health industry experts and presidential candidates. It also prompted scrutiny of Turing by two congressional committees examining the impact drug price hikes have on patients.
Shkreli resigned from Turing in December, one day after he was arrested and pleaded not guilty to unrelated charges of securities fraud. The embattled pharmaceutical entrepreneur, who had defended the Daraprim price hike, invoked his constitutional right not to testify and incriminate himself when he appeared under subpoena for a February hearing by the House Committee on Oversight and Government Reform.
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However, a May 27, 2015, Shkreli memo obtained by the House panel showed he wrote "$1bn here we come," as Turing moved to acquire the Daraprim sale rights.
"We raised the price from $1,700 per bottle to $75,000 ... so 5,000 paying bottles at the new price is $375,000,000 — almost all of it is profit and I think we will get 3 years of that or more," Shkreli wrote in an August memo also obtained by the committee.
Impax's lawsuit said the California company "had no forewarning of Turing's decision to raise the price of Daraprim" and would receive "no financial remuneration" linked to the increase.
"It nonetheless found itself subject to significant liability due to Turing's actions," Impax's lawsuit alleged. "Turing retains the profits from its stunning price increase and at the same time refuses to provide complete and timely information to Impax related to its Daraprim sales activities and to make Impax whole for the rebate liability."
The Manhattan federal court action focuses on Impax's transfer of "substantial Daraprim inventory" to Turing as part of the contract for the drug's sale rights. The deal authorized Turing to sell already-packaged Daraprim containers under Impax's labeler code and the National Drug Code, a unique U.S. Food and Drug Administration identifier.
According to the lawsuit, Turing was required to submit regular Daraprim pricing data to Impax because the California firm remained responsible to make certifications and pay rebates to the federal government for all of the transferred inventory. The rebates help offset federal and state costs of most outpatient prescription drugs dispensed to Medicaid patients.
Turing failed to provide the pricing data "for multiple months" and submitted quarterly pricing data late for three consecutive quarters, the lawsuit alleged. Turing also "refused to pay $20 million in rebate liability" owed to Impax, and may cause additional harm "by hindering Impax's ability to comply with its Medicaid reporting obligations," the lawsuit charged.
Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc