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Martin Shkreli Reaches Settlement to Pay $28 Million to Resolve Blue Cross and Blue Shield Litigation for Jacking Up the Price of Daraprim

Martin Shkreli

Former pharmaceutical executive Martin Shkreli points as he exits the courthouse after the jury issued a verdict in his case at the U.S. District Court for the Eastern District of New York, Aug. 4, 2017 in the Brooklyn borough of New York City.

Weeks after a federal judge issued a lifetime ban forbidding Martin Shkreli’s participation in the pharmaceutical industry, the disgraced so-called “Pharma Bro” and his old companies reached a $28 million deal that would resolve his litigation with Blue Cross and Blue Shield.

The money would compensate a settlement class consisting of “all third-party payer entities that indirectly purchased and/or provided reimbursement for Daraprim over a six-year period,” according to court records.

The insurer says that this class excludes “natural person consumers.”

Both cases involved the same misconduct that earned Shkreli national notoriety: his decision to jack up the price of the lifesaving drug Daraprim from $17.50 to $750, a more than 4,000-percent hike.

“A Real Danger”

Earlier this month, a federal judge found Shkreli violated federal antitrust law in a particularly “heartless and coercive” monopolistic scheme through a company then known as Turing Pharmaceuticals. Turing was later rebranded as Vyera, the entity sued by state and federal regulators along with its parent company, Phoenixus.

“Without a lifetime ban, there is a real danger that Shkreli will engage in anticompetitive conduct within the pharmaceutical industry again,” U.S. District Judge Denise Cote noted in a 135-page ruling on Jan. 14. “Shkreli established two companies, Retrophin and Vyera, with the same anticompetitive business model: Acquiring sole-source drugs for rare diseases so that he could profit from a monopolist scheme on the backs of a dependent population of pharmaceutical distributors, healthcare providers, and the patients who needed the drugs.”

That ruling, the culmination of regulatory action from the Federal Trade Commission and several state attorneys general, also ordered Shkreli to pay $64.6 million in disgorgement for what the court found to have been ill-gotten gains.

Docketed on Friday but announced by the company on Monday, Blue Cross and Blue Shield announced that they agreed to resolve their litigation on similar claims against Shkeli, Vyera and Phoenixus, rather than to take their case to trial.

“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 president and CEO at Blue Cross and Blue Shield of Minnesota, said 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.”

Unconscionable Price Increases”

On Friday, the insurer urged a federal judge to accept the “excellent” proposed agreement.

“After intensive litigation and extensive arms-length negotiations overseen by Magistrate Judge Robert W. Lehrburger, Plaintiff reached an excellent settlement for the Settlement Class,” the insurer’s 31-page memo states. “The Settlement enjoins Defendants’ anticompetitive conduct and secures seventy percent of the up to $40 million that the Corporate Defendants have agreed to pay to settle the Related Daraprim Actions. Plaintiff’s investigation into the law and facts of this case demonstrates the Settlement’s favorability.”

Blue Cross and Blue Shield’s attorneys Benjamin Steinberg and Kellie Lerner, from the firm Robins Kaplan, wrote the memo.

“We are pleased to be on the path towards compensating class members who we allege were harmed by the defendants’ scheme,” Lerner, the co-chair of the firm’s antitrust and trade regulation group, wrote in a statement. “We hope this settlement sends a clear message that private payers will fight against unconscionable price increases.”

Shkreli’s attorney Christopher H. Casey, from the firm Duane Morris LLP, did not immediately respond to an email requesting comment.

Judge Cote is also presiding over the insurer’s case.

Read the memo supporting the settlement below:

(Photo by Drew Angerer/Getty Images)

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Law&Crime's managing editor Adam Klasfeld has spent more than a decade on the legal beat. Previously a reporter for Courthouse News, he has appeared as a guest on NewsNation, NBC, MSNBC, CBS's "Inside Edition," BBC, NPR, PBS, Sky News, and other networks. His reporting on the trial of Ghislaine Maxwell was featured on the Starz and Channel 4 documentary "Who Is Ghislaine Maxwell?" He is the host of Law&Crime podcast "Objections: with Adam Klasfeld."