Washington, DC – Attorney General Karl A. Racine today announced a $125 million, 48-state settlement with Cephalon and affiliated companies (“Cephalon”). The settlement ends a multistate investigation into anticompetitive conduct by Cephalon to protect the monopoly profits it earned from its landmark wakefulness drug, Provigil. That conduct delayed generic versions of Provigil from entering the market for several years.
As a result of the settlement, the District will receive more than $200,000. Additionally, District consumers who purchased Provigil directly, without insurance or other assistance, will be eligible to receive restitution for those purchases.
“Generic drug competition is crucial to lowering prescription drug costs for consumers and the District,” said Attorney General Racine. “In an effort to protect consumers, the Office of the Attorney General will go after companies like Cephalon that try to circumvent the law to give themselves an unfair competitive advantage on the backs of consumers and taxpayers.”
As patent and regulatory barriers that prevented generic competition to Provigil drew close to their expiration dates, Cephalon intentionally defrauded the United States Patent and Trademark Office to secure an additional patent. Although a court eventually deemed that patent invalid and unenforceable, in the interim it still enabled Cephalon to delay generic competition for several years by filing patent infringement lawsuits against all potential generic competitors. Cephalon settled those lawsuits in 2005 and early 2006 by paying the generic competitors to delay sale of their generic versions of Provigil until at least April 2012. Because of that delayed entry, consumers, states, and others paid hundreds of millions of dollars more for Provigil than they would have had generic versions of the drug launched by early 2006, as expected.
District Provigil Consumers Eligible for an Estimated $95,000 in Restitution
The settlement includes $35 million for distribution to consumers who bought Provigil, and District consumers will be eligible to claim an estimated $95,000 of that amount as restitution for payments for Provigil. The District hopes that this distribution will be supplemented with settlement funds from a separate class-action suit against Cephalon.
In addition to consumer restitution, the District’s total recovery will be about $238,000 consisting of approximately $61,000 to compensate for Provigil purchases by District entities and $177,000 for the District’s share of Cephalon’s “disgorgement” (the company’s restitution for its ill-gotten gains as a result of the fraudulent activity) as well as costs.
“Many thanks to Assistant Attorney General Catherine Jackson in our Public Interest Division, who worked on this case to ensure that Cephalon paid the District and our consumers for their anticompetitive behavior,” Attorney General Racine said.
This multistate settlement was facilitated by litigation brought against Cephalon by the Federal Trade Commission (FTC). In May 2015, the FTC settled its suit against Cephalon for injunctive relief and $1.2 billion, which was paid into an escrow account. The FTC settlement allowed for those escrow funds to be distributed for settlement of certain related cases and government investigations, such as this multistate investigation.
The settlement is subject to court review, including providing consumers with notice and an opportunity to participate in, object to, or opt out of settlement. The states expect court review will be provided by Judge Mitchell Goldberg of the Eastern District of Pennsylvania, who is currently overseeing other litigation concerning Provigil against Cephalon and others.
A copy of the settlement agreement is attached.