The Case

On January 27, 2020, the Federal Trade Commission and seven state attorneys general filed an antitrust complaint against Vyera Pharmaceuticals LLC, its parent company Phoenixus AG, Martin Shkreli, and Kevin Mulleady. The FTC voted 5-0 to bring the case. The states were New York, California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia. The case was filed in the US District Court for the Southern District of New York.

The complaint said the defendants kept a monopoly on Daraprim (pyrimethamine) by blocking generic competition and protecting the $750 per tablet price.

The Three-Pronged Scheme

Restricted Distribution

Vyera used a closed distribution system through Walgreens Specialty Pharmacy. Its distribution agreements explicitly barred sales to generic drug companies. Strict quantity limits kept generic manufacturers from getting the supply needed for FDA bioequivalence testing, which required at least five bottles.

When Vyera learned an intermediary had obtained five bottles for Dr. Reddy's Laboratories, a generic manufacturer, CEO Kevin Mulleady became what the FTC called "frantic" and moved to stop the transaction. At least one generic company dropped its development plans after failing to obtain samples. Multiple manufacturers spent more than a year trying to buy branded samples and could not.

Vyera's former general counsel testified that the closed distribution system was "an integral part of the company's desire to block a generic entrant for at least three years."

Exclusive API Supply Agreements

Fukuzyu Pharmaceutical Co., Ltd. was the only FDA-approved manufacturer of pyrimethamine active pharmaceutical ingredient (API) for the US market. In 2017, Vyera signed an exclusive supply contract that barred Fukuzyu from selling API to anyone else for human use in the United States. The agreement did not require Fukuzyu to guarantee any supply volume to Vyera.

Vyera learned that several generic companies were working with RL Fine Chem, another potential API supplier, and signed an exclusive agreement that blocked RL Fine from supplying competitors. Vyera never bought API from RL Fine and never completed the regulatory work needed to use its product. Phoenixus paid RL Fine about $10 million solely to keep it from supplying generic manufacturers.

Data Blocking

Vyera entered agreements with distributors that blocked the sale of Daraprim sales data to third-party reporting companies such as IQVIA. Generic companies rely on that data to estimate market size before investing in development. Without reliable sales figures, the market looked smaller and less profitable than it was.

Impact of the Scheme

The FTC estimated that the anticompetitive practices delayed generic entry by about five years. An ANDA (Abbreviated New Drug Application) for generic pyrimethamine had been filed as early as 2014. The first generic was not approved until February 26, 2020, the same month the FTC filed its complaint.

The FTC calculated that the scheme generated about $64 million in illicit monopoly profits.

The Settlement

Vyera and the FTC settled in December 2021. The terms were finalised in 2022.

Against Vyera Pharmaceuticals

Vyera had to provide Daraprim at no more than $1 per tablet to certain buyers, pay up to $40 million over 10 years in consumer relief, license Daraprim to any qualified generic manufacturer that requested it, end all exclusive API supply agreements, and end all distribution restrictions meant to block generic competition.

Against Martin Shkreli

Shkreli was ordered to pay $64.6 million in disgorgement of illicit monopoly profits. He also received a lifetime ban from the pharmaceutical industry, which barred him from serving as an officer, director, employee, or consultant to any pharmaceutical company.

Against Kevin Mulleady

Mulleady received a seven-year ban from the pharmaceutical industry.

State Attorney General Involvement

The seven state attorneys general from New York, California, Illinois, North Carolina, Ohio, Pennsylvania, and Virginia served as co-plaintiffs. The New York Attorney General's office took a lead role because Vyera operated in New York.

Appeals

Vyera and Phoenixus challenged the FTC's authority. In January 2024, the Second Circuit Court of Appeals upheld the FTC's enforcement action. The court ruled that pharmaceutical companies cannot use distribution restrictions solely to block generic competition. It also affirmed the FTC's power to obtain disgorgement of monopoly profits.

Vyera's Bankruptcy

In May 2023, Vyera Pharmaceuticals and Phoenixus AG filed for Chapter 11 bankruptcy. Vyera had started with $90 million in financing and bought Daraprim for $55 million.

Precedents

Closed distribution systems used to block generic competition violate antitrust law. Exclusive API supply agreements with no legitimate business purpose are anticompetitive. Individual executives can face personal liability, including industry bans, for directing anticompetitive schemes. The FTC can obtain disgorgement of monopoly profits, not only injunctive relief.

The 2016 congressional hearings and their 400,000-page documentary record provided the evidentiary foundation for the FTC's antitrust case.