Case 1:20-cv-00706-DLC Document 865 Filed 01/14/22 Page 1 of 135 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 

-------------------------------------- X 

: 

FEDERAL TRADE COMMISSION, STATE OF NEW : 

YORK, STATE OF CALIFORNIA, STATE OF : 

OHIO, COMMONWEALTH OF PENNSYLVANIA, : 

STATE OF ILLINOIS, STATE OF NORTH : 

CAROLINA, and COMMONWEALTH OF : 

VIRGINIA, : 

: 

Plaintiffs, : 

-v- : 

: 

MARTIN SHKRELI, : 

: 

Defendant. : 

: 

-------------------------------------- X 

APPEARANCES: 

For plaintiff Federal Trade Commission: 

Markus H. Meier 

Bradley S. Albert 

Armine Black 

Daniel W. Butrymowicz 

J. Maren Haneberg 

Leah Hubinger 

Lauren Peay 

Neal J. Perlman 

James H. Weingarten 

Amanda Triplett 

Matthew B. Weprin 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

For plaintiff State of New York: 

Elinor R. Hoffmann 

Bryan Bloom 

Jeremy R. Kasha 

Amy E. McFarlane 

Saami Zain 

Office of the New York Attorney General 

Antitrust Bureau 

28 Liberty Street, 20th Floor 

20cv00706 (DLC) 

OPINION AND ORDER 
Case 1:20-cv-00706-DLC Document 865 Filed 01/14/22 Page 2 of 135 

New York, NY 10005 

For plaintiff State of California: 

Michael D. Battaglia 

Office of the Attorney General of California 

455 Golden Gate Avenue, Suite 11000 

San Francisco, CA 94102 

For plaintiff State of Illinois: 

Richard S. Schultz 

Office of the Attorney General of Illinois 

100 W. Randolph Street, 11th Floor 

Chicago, IL 60601 

For plaintiff State of North Carolina: 

Jessica V. Sutton 

North Carolina Dept. of Justice 

Consumer Protection Division 

114 West Edenton Street 

Raleigh, NC 27603 

For plaintiff State of Ohio: 

Beth A. Finnerty 

Office of the Ohio Attorney General 

150 E. Gay Street, 22nd Floor 

Columbus, OH 43215 

For plaintiff Commonwealth of Pennsylvania: 

Joseph S. Betsko 

Pennsylvania Office of Attorney General 

Strawberry Square, 14th Floor 

Harrisburg, PA 17120 

For plaintiff Commonwealth of Virginia: 

Tyler T. Henry 

Office of the Attorney General of Virginia 

202 North Ninth Street 

Richmond, VA 23219 

For defendant Martin Shkreli: 

Christopher H. Casey 

Jeffrey S. Pollack 

Andrew J. Rudowitz 

Sarah Fehm Stewart 

Sean P. McConnell 

J. Manly Parks 

Duane Morris LLP 

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30 South 17th Street 

Philadelphia, PA 19103 

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Procedural History..............................................7 

Background.....................................................16 

I. FDA Drug Approval Process for Generic Drugs ............ 16 

II. Retrophin ............................................. 24 

III. Vyera is Founded. ..................................... 26 

A. Vyera Acquires Daraprim. .............................. 28 

B. Daraprim’s 2015 Price Hike and Vyera’s Revenues ....... 32 

IV. Vyera’s Implementation of a Closed Distribution System 

for Daraprim ................................................ 34 

A. Class of Trade Restrictions ........................... 36 

B. Bottle Limits ......................................... 39 

C. Surveillance .......................................... 41 

D. Benefits to Distributors .............................. 43 

V. Vyera’s Restriction of Access to the API Pyrimethamine . 43 

A. Fukuzyu ............................................... 44 

B. RL Fine ............................................... 48 

VI. Delay of Generic Entry ................................ 53 

A. Barriers to Entry ..................................... 54 

B. Cerovene and Dr. Reddy’s Laboratories ................. 56 

C. Fera .................................................. 66 

D. InvaTech .............................................. 74 

E. Mylan ................................................. 76 

VII. Impact of Competition on Prices of Daraprim ........... 77 

VIII. The Role of Martin Shkreli at Vyera ................. 80 

Discussion.....................................................86 

I. Legal Standard ......................................... 87 

A. Section 5 of the FTC Act .............................. 87 

B. Section 1 of the Sherman Act .......................... 87 

C. Section 2 of the Sherman Act .......................... 90 

Monopoly Power ...................................... 90 

Anticompetitive Conduct ............................. 93 

II. Plaintiff States’ Laws ................................ 94 

A. New York .............................................. 94 

B. California ............................................ 96 

C. Illinois .............................................. 96 

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D. North Carolina ........................................ 97 

E. Ohio .................................................. 97 

F. Pennsylvania .......................................... 98 

G. Virginia .............................................. 98 

III. Liability ............................................. 99 

B. The Relevant Market .................................. 100 

C. Monopoly Power ....................................... 108 

D. Anticompetitive Conduct .............................. 109 

Distribution Contracts ............................. 109 

Exclusive Supply Agreements ........................ 111 

Degree of Burden on Generic Competitors ............ 117 

E. Shkreli is Individually Liable ....................... 120 

IV. Remedies ............................................. 121 

A. Injunctive Relief .................................... 122 

B. Disgorgement ......................................... 128 

Cerovene and Dr. Reddy’s Hypothetical Entry Date ... 130 

Fera’s Hypothetical Entry Date ..................... 130 

Vyera’s Excess Profits ............................. 131 

C. Shkreli’s Liability for Vyera’s Excess Profits ....... 132 

Conclusion....................................................134 

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DENISE COTE, District Judge: 

In 2015, Martin Shkreli raised the price of the life-saving 

pharmaceutical Daraprim by 4,000% and initiated a scheme to 

block the entry of generic drug competition so that he could 

reap the profits from Daraprim sales for as long as possible. 

Through his tight control of the distribution of Daraprim, 

Shkreli prevented generic drug companies from getting access to 

the quantity of Daraprim they needed to conduct testing demanded 

by the Food and Drug Administration (“FDA”). Through exclusive 

supply agreements, Shkreli also blocked off access to the two 

most important manufacturers of the active pharmaceutical 

ingredient (“API”) for Daraprim. Through these strategies, 

Shkreli delayed the entry of generic competition for at least 

eighteen months. Shkreli and his companies profited over $64 

million from this scheme. 

The Federal Trade Commission (“FTC”) and seven States1 (the 

“States”; collectively, “Plaintiffs”) filed this action in 2020. 

At a bench trial held over seven days between December 14 and 

22, 2021, the Plaintiffs carried their burden to establish that 

Shkreli violated federal and state laws that ban anticompetitive 

conduct. Based on the trial evidence, Shkreli will be barred 

1 The seven state plaintiffs are the States of New York, 

California, Ohio, Illinois, and North Carolina, and the 

Commonwealths of Pennsylvania and Virginia. 

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for life from participating in the pharmaceutical industry and 

is ordered to disgorge $64.6 million in net profits from his 

wrongdoing. This Opinion contains the Findings of Fact and 

Conclusions of Law from the trial. 

Procedural History 

The Plaintiffs filed this action on January 27, 2020 and 

brought claims for violations of §§ 1 and 2 of the Sherman Act, 

15 U.S.C. §§ 1-2, § 5(a) of the FTC Act, 15 U.S.C. § 45(a), and 

various state statutes.2 They brought these claims against 

Shkreli, Vyera Pharmaceuticals, LLC and its parent company 

Phoenixus AG (“Phoenixus”; together, “Vyera”), and Kevin 

Mulleady (“Mulleady”), former Vyera CEO and member of the 

Phoenixus Board of Directors (collectively, “Defendants”). The 

Defendants’ motion to dismiss was largely denied through an 

2 The States pursuing statutory claims sue under the Sherman Act 

and under the California Cartwright Act, Cal. Bus. & Prof. Code 

§ 16700, and California Unfair Competition Law, Cal. Bus. & 

Prof. Code § 17200; Illinois Antitrust Act, Ill. Comp. Stat. 

10/3(3); the New York Donnelly Act, N.Y. Gen. Bus. Law § 340 et 

seq., and New York Executive Law, N.Y. Exec. Law § 63(12); North 

Carolina Unfair or Deceptive Practices Act, N.C. Gen. Stat. § 

75-1 et seq.; Ohio Valentine Act, Ohio Rev. Code Ann. § 1331; 

and Virginia Antitrust Act, Va. Code Ann. § 59.1 et seq. 

Pennsylvania sues under the Sherman Act and its common law 

doctrine against restraint of trade. 

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Opinion of August 18, 2020.3 See Fed. Trade Comm'n v. Vyera

Pharms., LLC, 479 F. Supp. 3d 31 (S.D.N.Y. 2020). 

Two decisions in 2021 addressed the Plaintiffs’ requests 

for equitable monetary relief.4 A June 2, 2021 Order granted the 

FTC’s motion for leave to withdraw its prayer for equitable 

monetary relief pursuant to the Supreme Court’s decision in AMG 

Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341, 1352 

(2021). An Opinion of September 24 denied the Defendants’ 

motion for partial summary judgment on the nationwide scope of 

the States’ prayer for equitable monetary relief, and granted 

the Plaintiffs’ cross-motion for summary judgment on the same 

issue. See Fed. Trade Comm'n v. Vyera Pharms., LLC, No. 

20CV00706 (DLC), 2021 WL 4392481, at *5 (S.D.N.Y. Sept. 24, 

2021). 

Only Shkreli proceeded to trial; on the eve of trial Vyera 

and Mulleady settled with both the FTC and the States. Before 

those settlements were reached, the parties’ submitted their 

Joint Pretrial Order, proposed findings of fact and conclusions 

of law, motions in limine, and pretrial memoranda on October 20. 

3 Pennsylvania’s statutory claim under the Pennsylvania Unfair 

Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1 et 

seq., was dismissed. 

4 On March 30, 2021, the Plaintiffs waived their right to money 

damages and therefore their right to a jury trial. 

8 
 

 

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Following rulings on redactions, these submissions were filed on 

November 29. 

As is customary for this Court’s non-jury proceedings, and 

with consent of the parties, the direct testimony of those 

witnesses under a party’s control were submitted with the Joint 

Pretrial Order.5 The parties also served copies of all exhibits 

and deposition testimony that they intended to offer as evidence 

in chief at trial.6 

Prior to trial, the motions in limine were decided. On 

November 5, Shkreli’s motion in limine to preclude evidence 

relating to Retrophin, Inc. (“Retrophin”), a pharmaceutical 

company that Shkreli and Mulleady founded in 2011, was denied. 

Id., 2021 WL 5154119 (S.D.N.Y. Nov. 5, 2021). On November 10, 

motions by Shkreli and Mulleady to exclude the testimony of 

current and former employees of Vyera were addressed in an 

Opinion that set forth the standards that would govern the 

5 These affidavits were ordered to be filed on the day on which 

the witness testified or was deemed to have testified at trial. 

6 The Court’s procedures for non-jury trials were discussed in 

detail at a conference of December 10, 2021. As the parties 

were informed, the Court prepared a draft opinion in advance of 

the bench trial based on the witness affidavits and other 

documents submitted with the Pretrial Order and the arguments of 

counsel in their trial memoranda. At trial, the affiants swore 

to the truth of the contents of their affidavits and were 

tendered for cross and redirect examination, and the other trial 

evidence was formally received. 

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admissibility of such testimony. Id., 2021 WL 5236333 (S.D.N.Y. 

Nov. 10, 2021). An Opinion of November 12 denied the 

Defendants’ motion to exclude certain testimony of Plaintiffs’ 

expert Professor C. Scott Hemphill (“Hemphill”), an economist 

and Professor of Law at New York University, and granted the 

Plaintiffs’ motion to exclude certain opinions offered by Dr. 

Anupam B. Jena (“Dr. Jena”), a physician, economist, Professor 

of Health Care Policy and Medicine at Harvard Medical School, 

and Internal Medicine Specialist in the Department of Medicine 

at Massachusetts General Hospital. Id., 2021 WL 5279465 

(S.D.N.Y. Nov. 12, 2021). Opinions of November 15 granted the 

Plaintiffs’ motion to exclude designated deposition testimony of 

Rule 30(b)(6), Fed. R. Civ. P., deponents that were not based on 

personal knowledge, id., 2021 WL 5300019 (S.D.N.Y. Nov. 15, 

2021), and excluded testimony from Defendants’ expert Justin 

McLean, id., 2021 WL 5300031 (S.D.N.Y. Nov. 15, 2021). An 

Opinion of November 16 struck most of the testimony offered by 

Defendants’ expert Sheldon Bradshaw. Id., 2021 WL 5336949 

(S.D.N.Y. Nov. 16, 2021).7 On November 18, the Plaintiffs’ 

motion to exclude portions of testimony by Defendants’ expert 

John S. Russell (“Russell”), Managing Partner for ASDO 

7 Thereafter, Shkreli withdrew the testimony of Bradshaw and the 

Plaintiffs withdrew the testimony of their rebuttal expert, 

Mansoor A. Khan. 

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Consulting Group, a pharmaceutical consulting company, was 

largely granted. Id., 2021 WL 5403749 (S.D.N.Y. Nov. 18, 2021). 

At trial, eleven fact witnesses and four expert witnesses 

called by the Plaintiffs testified. The Plaintiffs’ fact 

witnesses included one current Vyera executive -- Nicholas 

Pelliccione (“Pelliccione”), Vyera’s Senior Vice President of 

Research and Development (“R&D”) -- and four former executives 

and employees: Howard Dorfman, Vyera’s General Counsel between 

December 2014 and August 2015; Christina Ghorban, Vyera’s Head 

of Marketing and Business Analytics between April 2015 and 

October 2016; Dr. Eliseo Salinas (“Dr. Salinas”), Vyera’s 

President of R&D between June 2015 and April 2017 and interim 

CEO between April and July 2017; and Mulleady, who worked at 

Vyera from October 2014 to June 2016, was appointed to Vyera’s 

Board in June 2017, served as Executive Director and then CEO 

between October 2017 and February 2019, and was chairman of the 

Phoenixus Board of Directors until December 2020. The 

Plaintiffs called six additional fact witnesses: Frank 

DellaFera (“DellaFera”), CEO and founder of Fera 

Pharmaceuticals, Inc. (“Fera”); Susan McDougal (“McDougal”), 

Fera’s Vice President; Abhishek Mukhopadhyay (“Mukhopadhyay”), 

Head of Business Development at Dr. Reddy’s Laboratories, Inc. 

(“Dr. Reddy’s”); Nilesh Patel (“Patel”), co-founder and 

Compliance and Regulatory Officer of InvaTech Pharmaceuticals 

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LLC (“InvaTech”); Manish Shah (“Shah”), co-founder and President 

of Cerovene Health, Inc. (“Cerovene”); and Satya Valiveti 

(“Valiveti”), co-founder and co-owner of Reliant Specialty LLC 

(“Reliant”). 

The Plaintiffs’ expert witnesses were James R. Bruno, 

managing director of Chemical and Pharmaceuticals Solutions, 

Inc., a pharmaceutical consulting company; Edward V. Conroy, 

President and Chief Operating Officer of Ed Conroy & Associates, 

a pharmaceutical consulting firm; Dr. W. David Hardy, a 

physician and Adjunct Clinical Professor of Medicine in the 

Division of Infectious Diseases at the Keck School of Medicine 

at the University of Southern California and former Chair of the 

Board of Directors of the HIV Medicine Association (“HIVMA”) of 

the Infectious Diseases Society of America (“IDSA”); and 

Hemphill.8 

The Plaintiffs also intended to call at trial three 

additional fact witnesses to testify: Shkreli; Eve Costopoulos 

(“Costopoulos”), Vyera’s former General Counsel from November 

2015 to July 2017; and Anne Kirby (“Kirby”), a member of Vyera’s 

sales team from June 2015 to late 2018, CEO from late 2018 to 

8 The Plaintiffs filed affidavits constituting the direct 

testimony of five of their fact witnesses and all of their 

experts. The five fact witnesses were DellaFera, McDougal, 

Mukhopadhyay, Patel, and Shah. 

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early 2019, and current Executive Vice President of Commercial 

and Operations. Shkreli is incarcerated in federal prison, 

serving a sentence on an unrelated federal conviction.9 He opted 

not to attend the trial. The parties agreed that the affidavit 

that he had prepared to present as his direct testimony would be 

received at the trial and that his cross-examination and 

redirect examination would be conducted through the designation 

of his pretrial deposition testimony. 

Neither Kirby nor Costopoulos appeared at trial. The 

parties agreed that Kirby’s affidavit would be received as her 

direct testimony and that cross-examination and redirect would 

be conducted by deposition designation. The parties also agreed 

to designate portions of Costopoulos’ deposition to serve as her 

trial testimony. 

At the time the Pretrial Order was submitted, Shkreli 

intended to call eleven of the Plaintiffs’ witnesses in his own 

case in addition to testifying on his own behalf: Mulleady, 

Pelliccione, Kirby, Costopoulos, Dr. Salinas, DellaFera, 

9 Shkreli was arrested in December 17, 2015 on federal criminal 

charges. A jury convicted him on August 4, 2017. He was 

sentenced on March 8, 2018, principally to a term of 

imprisonment of eighty-four months (seven years). Shkreli was 

remanded to federal custody on September 13, 2017. He is 

currently scheduled to be released on October 11, 2023, or one 

year earlier pending successful completion of an early release 

program. 

13 
 

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McDougal, Mukhopadhyay, Patel, Shah, and Valiveti.10 Affidavits 

constituting the direct testimony of defense witnesses Shkreli, 

Mulleady, Pelliccione, and Kirby were received into evidence. 

Shkreli also called two expert witnesses: Russell and Dr. Jena. 

The parties offered excerpts from the depositions of the 

following additional witnesses associated with Vyera: Jonathan 

Haas, Vyera’s Former Director of Patient Access; Christopher Lau 

(“Lau”), Vyera’s Director of Analytics and Business 

Intelligence; Akeel Mithani (“Mithani”), Senior Vice President 

of Business Development of Vyera and former member of the 

Phoenixus Board of Directors; Averill Powers, CEO and former 

Chairman of the Phoenixus Board, and Vyera’s General Counsel; 

Marco Polizzi, CEO of Vyera subsidiary Oakrum Pharma, LLC; Nancy 

Retzlaff (“Retzlaff”), Vyera’s former Chief Commercial Officer; 

Michael Smith (“Smith”), co-founder of Vyera and former member 

of the Business Development team; and Ron Tilles (“Tilles”), 

Vyera’s former CEO and Chairman of the Phoenixus Board. They 

also offered excerpts from the depositions of seventeen 

additional fact witnesses: Nilaben Desai, former manager at ASD 

Healthcare (“ASD”); Michael Hatch, Head of Global Project 

10 The parties had agreed that each witness would take the stand 

a single time at trial. To the extent Shkreli had also intended 

to call the witness on his own case, his “cross-examination” of 

the witness was not restricted by the scope of the direct 

testimony. 

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Management for R&D for Mylan N.V. (“Mylan”) affiliate Viatris 

Inc.; Courtney Johnson, former Director of Global Sourcing & 

Business Development for Cardinal Specialty (“Cardinal”); 

Hamilton Lenox, Senior Vice President of Business Development at 

LGM Pharma; Amanda Lopez, Clinical Trial Supervisor for Durbin 

USA; Jacob Mathew, Chairman of RL Fine Chem. Pvt. Ltd. (“RL 

Fine”); Ravi Patel, part-owner of Espee Biopharma & Fine Chem; 

Donovan Quill, founder and CEO of Optime Care, Inc. (“Optime”); 

Paula Raese, Senior Director of API Sourcing for Mylan; A.R. 

Ramachandra, General Manager of Marketing and Sales at RL Fine; 

Dennis Saadeh, Chief of Formulation Strategy for Harrow Health, 

parent company of Imprimis; Dr. Lucas Schulz, Clinical 

Coordinator for Infectious Diseases in the Department of 

Pharmacy at the University of Wisconsin Health; Devang Shah, 

Director of Aadivignesh Chem.; Dr. Eric Sredzinski, formerly the 

head of clinical affairs and quality assurance for Avella; Dr. 

John Vande Waa, Division Director of the Division of Infectious 

Diseases for the University of South Alabama Health; and Kevin 

Wessels, Senior Director of Trade Relations at Zinc Health 

Services, a subsidiary of CVS Health (“CVS”).11 

11 Excerpts of the deposition of a witness from an API 

manufacturer, the name of which has been sealed, were also 

received into evidence. 

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As noted, the bench trial was held from December 14 to 

December 22, 2021, and this Opinion presents the Court's 

findings of fact and conclusions of law. The findings of fact 

appear principally in the Background section, but also appear in 

the remaining sections of the Opinion. 

Background 

I. FDA Drug Approval Process for Generic Drugs 

Shkreli’s scheme unfolded against the backdrop of the U.S. 

regulatory process for the approval and sale of pharmaceutical 

drugs. The FDA is the federal agency that approves the sale of 

branded and generic drugs in the United States. The Drug Price 

Competition and Patent Term Restoration Act of 1984, Pub. L. No. 

98–417, 98 Stat. 1585, commonly known as the Hatch–Waxman Act, 

allows a generic manufacturer of an already approved brand-name 

drug to obtain expedited approval from the FDA to market the 

generic equivalent by filing an Abbreviated New Drug 

Application, or ANDA. See FTC v. Actavis, Inc., 570 U.S. 136, 

142 (2013) (“Actavis”). The ANDA process is designed to help 

expedite market introduction of low-cost generic drugs in order 

to further competition. Id. 

Any pharmaceutical company applying for FDA approval of a 

generic competitor to a branded drug must obtain the API used in 

the branded drug -- that is, the drug’s critical ingredient that 

provides its therapeutic effect -- from an approved supplier. 

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The API to be used in the generic drug is evaluated for 

impurities and stability. 21 C.F.R. §§ 211.165, 211.170. 

An API supplier’s manufacturing process must also comply 

with FDA standards known as current Good Manufacturing Practices 

(“cGMPs”). FDA regulations set minimum standards for the 

methods, facilities, controls, and documentation for 

manufacturing, processing, and packing of the pharmaceutical, 

including its API. 

A pharmaceutical company may demonstrate that the 

manufacturing process of the API used in its drug product 

complies with cGMPs either by supplying that information to the 

FDA in the ANDA itself or, more commonly, by referencing 

information filed by an API supplier with the FDA in a 

standalone drug master file (“DMF”). The FDA categorizes DMFs 

for APIs as Type II DMFs. To file a Type II DMF, an API 

supplier must pay a fee and submit enough materials, including 

confidential documents about the manufacturer’s facilities, 

processing, packaging, and storing of human drug products, to 

permit the FDA to conduct a full scientific review for any ANDAs 

that reference the DMF. The FDA conducts a completeness 

assessment of an API supplier’s newly-filed DMF at the time it 

is submitted, but does not fully review a DMF’s documented 

manufacturing process for cGMPs compliance until the DMF is 

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referenced in a new drug application (“NDA”) or ANDA. 21 CFR § 

314.420(a). 

In order to obtain the API for a particular drug product a 

pharmaceutical company may invest in developing an API 

supplier’s manufacturing processes, or it may shorten the 

process significantly by partnering with an API supplier that 

has already filed a DMF for the API. Because developing and 

documenting a cGMPs-compliant API manufacturing process from 

scratch is time-consuming and expensive -- it can take twelve to 

eighteen months or more and may cost over $1 million -- generic 

pharmaceutical companies prefer to use a supplier that already 

has an FDA-approved DMF for the API. 

Therefore, any generic company that seeks to launch a 

product as fast as possible generally attempts to partner with a 

DMF-holding supplier whose API is already in use in another FDAapproved product. A less desirable option is partnering with an 

API manufacturer that currently produces the API but does not 

have a DMF filed in the U.S. The least attractive option is to 

develop a cGMPs-compliant manufacturing process from scratch, 

which is costly and can take years. 

Proof of therapeutic equivalency is also central to the 

ANDA process. A generic manufacturer applying for approval of 

its drug must demonstrate that the generic drug “has the same 

active ingredients as, and is biologically equivalent to, the 

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already-approved brand-name drug.” Actavis, 570 U.S. at 142 

(citation omitted); see also 21 C.F.R. §§ 314.92(a)(1), 

314.3(b). 

Bioequivalence (“BE”) testing compares the generic product 

to samples of the branded drug, commonly referred to as the 

reference listed drug (“RLD”). BE studies are used to evaluate 

whether there is any significant difference in the rate and 

extent to which the product’s active ingredient becomes 

available in the body.12 21 C.F.R. § 320.33. BE testing 

demonstrates to the FDA that the proposed generic drug product 

is safe, effective, and comparable to the RLD. 

In a BE study, human subjects are given dosages of the 

generic drug and the RLD. These studies, which take two to six 

weeks to complete, are typically run by a third-party clinical 

organization concurrently with the FDA-required shelf stability 

testing for the first batch of the finished generic product. 

The stability testing can take three to six months. 

In order to conduct BE testing, a generic drug applicant 

must procure sufficient quantities of the brand-name drug or RLD 

12 FDA regulations define bioequivalence as “the absence of a 

significant difference in the rate and extent to which the 

active ingredient or active moiety in pharmaceutical equivalents 

or pharmaceutical alternatives becomes available at the site of 

drug action when administered at the same molar dose under 

similar conditions in an appropriately designed study.” 21 CFR 

§§ 320.1, 314.3(b). 

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and retain those quantities before and after approval of an 

ANDA. FDA regulations require applicants to retain at least 

five times the amount of the RLD needed to perform BE testing. 

21 C.F.R. § 320.38(c). 

The RLD used in the testing must come from the same 

manufacturing lot and be unexpired. Obtaining sufficient 

quantities of RLD usually takes only a few days or, at most, a 

month. 

Consistent with its policy of encouraging price competition 

for prescription pharmaceuticals, the FDA expresses the view 

that “a path to securing samples of brand drugs for the purpose 

of generic drug development should always be available.”13 By 

utilizing an RLD license permitting them to buy prescription 

drugs without a prescription, pharmaceutical companies often 

procure the RLD samples needed to develop generic drug products 

through drug wholesalers or specialty pharmacies. 

If the FDA determines that a proposed generic drug is 

therapeutically equivalent to the brand-name drug listed in the 

13 Statement from FDA Commissioner Scott Gottlieb, M.D., on New 

Agency Efforts to Shine Light on Situations Where Drug Makers 

May Be Pursuing Gaming Tactics to Delay Generic Competition, FDA 

(May 17, 2018), https://www.fda.gov/news-events/pressannouncements/statement-fda-commissioner-scott-gottlieb-md-newagencyefforts-shine-light-situations-where-drug. 

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FDA’s “Orange Book,”14 the agency assigns an “AB” rating to that 

drug. But if the FDA finds major deficiencies in an ANDA and 

the applicant does not address its inquiries during the review 

period, the FDA sends the applicant a complete response letter 

detailing the identified deficiencies. 

To foster price competition among pharmaceuticals, the law 

provides various incentives to pharmaceutical companies. See

Generic Drug User Fee Act, 21 U.S.C. § 356h. These include the 

FDA’s prioritization of its review of the first generic entrant 

to file an ANDA. The first generic drug product to enter a 

market in competition against the brand name drug is known in 

the pharmaceutical industry as the “first-to-market” generic. 

As generic drugs typically enter a market at a discount, 

the entry of the first generic competitor generally results in 

price erosion of approximately 30% to 40% from the prevailing 

price of the brand-name drug. The brand name drug’s sales 

volume also experiences a significant decline of approximately 

60% to 70% when the first generic enters the market. Six months 

after generic entry, the brand name drug’s sales will typically 

14 The FDA publication Approved Drug Products with Therapeutic 

Equivalence Evaluations, commonly known as the Orange Book, 

“identifies drug products approved on the basis of safety and 

effectiveness by the [FDA] under the Federal Food, Drug, and 

Cosmetic Act.” Orange Book Preface, FDA (January 21, 2021), 

https://www.fda.gov/drugs/development-approval-processdrugs/orange-book-preface. 

21 
 

 

 

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have fallen by 80%. The branded drug’s sales volume and price 

usually continue to decline as additional generic products enter 

the market. The full decline in the price of the drug usually 

occurs after three or four generic drugs have entered the 

market. 

II. Distribution of Prescription Drugs in the U.S. 

When introducing a branded drug or its generic equivalent 

into the U.S. market, the manufacturer can choose to distribute 

it with fewer or more restrictions. The poles of this spectrum 

are referred to in the pharmaceutical industry as open 

distribution, representing the least restrictive means, and 

specialty distribution, which can range from minor limitations 

to severe restrictions on how freely a drug is sold. 

Restrictions are set by the manufacturer in agreements with its 

distribution partners. 

Seventy percent of prescription drugs sold in the U.S. is 

in open distribution. In an open system, the manufacturer 

typically partners with a major distributor to deliver the 

product to licensed dispensaries such as retail pharmacies, 

hospitals, clinics, and nursing homes. Open distribution 

maximizes patient access to a given drug and is generally 

appropriate for pharmaceutical products that do not require 

special handling, do not present safety concerns, and are self22 
 

 

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administered by the patient or are clinically simple to 

administer. 

By contrast, approximately 30% of the volume of U.S. 

prescription drugs is sold through some degree of specialty 

distribution. Also known as closed distribution, a drug that is 

circulated in a specialty distribution system is referred to in 

the pharmaceutical industry as being “in specialty” or as having 

a “class of trade” restriction. Drugs in specialty distribution 

tend to be novel drugs, have special shipping, handling, and 

storage requirements (such as cold-chain storage), or require 

ongoing clinical monitoring or skilled patient administration 

(such as injections). Highly closed distribution systems 

usually lower patient access and reduce sales. 

Safety concerns may also mark a particular drug as a prime 

candidate for specialty distribution. Specialty distribution is 

more frequent, for instance, when the FDA requires a “black box” 

warning on the label of drugs that present safety risks or when 

it has put the drug in a Risk Evaluation and Mitigation 

Strategies (“REMS”) program. REMS is a drug safety program that 

the FDA may require for certain medications that present serious 

safety risks. 

The percentage of prescription drugs on the U.S. market 

that are sold in specialty distribution has risen in recent 

years. This trend, however, is largely driven by the advent of 

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new, complex therapies for illnesses such as cystic fibrosis and 

cancer. Drug manufacturers do not commonly put oral tablets 

that do not require complex patient administration in specialty 

distribution, as closed distribution reduces sales. 

II. Retrophin 

Shkreli road-tested the scheme at issue here at another 

company that he founded, Retrophin. Shkreli is thirty-eight 

years old. He graduated from Baruch College in 2004 with a 

degree in Business Administration. After graduation, he worked 

as a healthcare and technology analyst for a hedge fund until he 

left in 2006 to found his own investment firm. In 2009, Shkreli 

founded the hedge fund MSMB Capital Management (“MSMB”). 

While still working at MSMB, in 2011 Shkreli co-founded 

Retrophin, a publicly-traded biopharmaceutical company, with 

Mulleady. Mulleady is now thirty-nine years old. He graduated 

from Rutgers University in 2005, having majored in mechanical 

and aerospace engineering. He worked in real estate and finance 

following graduation. While working at Morgan Stanley Smith 

Barney (now Morgan Stanley Wealth), he met Shkreli in 2011. 

Shkreli hired Mulleady as Chief Operating Officer at MSMB, where 

Mulleady worked from 2011 to 2013. 

Shkreli served as Retrophin’s CEO from December 2012 to 

September 2014, and designed its business model. Retrophin 

acquired brand-name drugs approved to treat so-called orphan 

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Case 1:20-cv-00706-DLC Document 865 Filed 01/14/22 Page 25 of 135 

diseases15 that were the sole source in the U.S. for that 

treatment, closed the drugs’ distribution to prevent generic 

drug manufacturers from acquiring the RLD, and substantially 

increased the drugs’ prices. This was a pattern that Shkreli 

would repeat at Vyera. 

At Retrophin, Shkreli closed the distribution systems of 

two branded drugs, Chenodal and Thiola, to cut off access to the 

RLD needed for BE testing and impede generic drug competition. 

Shkreli described his strategy and its purpose frankly in calls 

with Retrophin investors. On one such call, he explained that 

“we do not sell Retrophin products to generic companies” and 

“[t]he whole model that generics rely upon is turned upside down 

with specialty pharmacy distribution.” He explained in another 

call that a closed distribution system did not allow generic 

drug companies to access the branded product “to conduct 

bioequivalence studies.” Shkreli boasted in an email to a 

potential investor that the specialty distribution method 

Retrophin had adopted “reliably eliminated” generic competition 

“by refusing to supply the product to generic companies for [BE] 

studies required for ANDAs.” 

15 An orphan disease is a rare condition (defined in the United 

States as affecting fewer than 200,000 people) or a common 

condition in undeveloped countries that is rare in developed 

countries. 

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As noted, Shkreli put his strategy into practice with two 

drugs. Retrophin acquired Chenodal, a drug approved for the 

treatment of cerebrotendinous xanthomatosis (“CTX”), and 

restricted distribution through distributor agreements.16 

Retrophin then raised Chenodal’s price from $100,000 to $515,000 

per patient per year. Retrophin also licensed Thiola, a drug 

approved for the prevention of cystine stone formation in 

patients with cystinuria,17 restricted its distribution, and 

raised its price from $4,000 to $80,000 per patient per year. 

III. Vyera is Founded. 

Only one month after departing Retrophin, in October 2014 

Shkreli founded Turing Pharmaceuticals LLC (“Turing”), a 

privately-held pharmaceutical company with its principal place 

of business in New York. Shkreli also founded Turing 

Pharmaceuticals AG (“Turing AG”), Turing’s parent company, based 

in Switzerland. Turing’s name was later changed to Vyera, and 

Turing AG became Phoenixus. 

From day one, Shkreli focused his new venture on acquiring 

sole-source drugs that were the gold standard treatment option 

for life-threatening diseases with a small patient population 

16 CTX is a life-threatening cholate excretion disorder. The 

patient population for CTX is very small, with roughly 2,000 

patients in the United States. 

17 Cystinuria is a rare kidney stone disorder, also with a very 

small patient population. 

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Case 1:20-cv-00706-DLC Document 865 Filed 01/14/22 Page 27 of 135 

and inferior alternative treatments, with the intent to raise 

their prices, block generic competition, and reap extraordinary 

profits. Shkreli highlighted to early Turing investors his 

“track record of successful transactions” at Retrophin and 

explained that “[e]xclusivity (closed distribution) creates a 

barrier and pricing power.” 

Shkreli remained CEO of Turing until his arrest on December 

18, 2015 for securities fraud related to his prior business 

ventures, including at Retrophin. He served as chairman of the 

Board of Turing AG until January 20, 2016, resigning from the 

Board entirely on February 10, 2016. After Shkreli departed, 

Turing was renamed Vyera and Turing AG was renamed Phoenixus in 

order to distance the companies from Shkreli in the public mind. 

Shkreli remained the largest shareholder, however, and continued 

to control them and direct their strategy. At no time after 

Shkreli left the Board did Vyera deviate from the strategy 

Shkreli had designed and initiated. 

Shkreli brought with him to Vyera several Retrophin 

executives, including Mulleady, Tilles, Smith, Lau, Edwin 

Urrutia (a Vyera co-founder and Chief Financial Officer between 

October 2014 and June 2016), and Patrick Crutcher (a Vyera cofounder and Senior Vice President and Head of Business 

Development between October 2014 and May 2017). Mulleady in 

particular was one of Shkreli’s closest allies at Vyera before 

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earning Shkreli’s ire in 2020. Mulleady held the title of 

Phoenixus’ Managing Director from October 27, 2014 until Vyera 

terminated his employment on June 3, 2016. Mulleady returned to 

Vyera a year later when, on June 21, 2017, he was elected to 

Phoenixus’ Board of Directors in a Shkreli power play. 

A. Vyera Acquires Daraprim. 

At Shkreli’s direction, Vyera’s sales and business 

development teams evaluated market opportunities for Vyera to 

acquire sole-source drugs. By the Spring of 2015, Vyera focused 

on Daraprim as a prime candidate. Smith, Vyera’s Senior 

Director of Business Development, instructed the sales team in 

April 2015 to investigate acquiring both Daraprim and another 

sole-source drug, sulfadiazine (often used in combination with 

Daraprim), because it would be “the classic closed distribution 

play.” Smith testified that Daraprim provided an opportunity to 

build a foothold “where no one is paying attention to it.” 

Daraprim was first approved by the FDA in 1953, and approved by 

the FDA in 1958 for the treatment of toxoplasmosis specifically. 

Toxoplasmosis is a parasitic infection that can cause 

severe disease and death. The parasite is present in 

approximately 10% of the population, but is usually dormant. An 

opportunistic infection, toxoplasmosis principally impacts 

immunosuppressed and immunocompromised individuals such as 

patients who are HIV positive or recipients of organ 

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transplants. Toxoplasmosis can cause disease in many parts of 

the body, but the most common manifestations are infections of 

the brain (toxoplasma encephalitis), eye (ocular toxoplasmosis), 

and in utero. 

Toxoplasma encephalitis is the most common and acute 

presentation of the disease among immunosuppressed patients. 

Toxoplasmosis fatalities have dropped significantly since the 

launch of antiretroviral therapies in 1996, which significantly 

limited opportunities for a toxoplasmosis infection to become 

acute in HIV-positive patients. If an infection becomes active 

and advanced, a patient presenting with toxoplasma encephalitis 

could die within twelve to twenty-four hours unless treated. 

There is also a risk of severe brain damage in those who 

survive. As a result, physicians must have an effective 

treatment on hand to halt the progress of an active infection as 

quickly as possible. 

The Opportunistic Infections Guidelines (the “Guidelines”), 

an authoritative publication on which physicians depend,18 gives 

18 The Guidelines are published by the Centers for Disease 

Control and Prevention, the National Institutes of Health, and 

HIVMA. The Guidelines reflect the medical consensus for the 

benefit of “clinicians, health care providers, patients with 

HIV, and policymakers in the United States.” They are updated 

and reviewed regularly. The section addressed to the treatment 

of toxoplasmosis was last updated on July 25, 2017, and last 

reviewed on June 26, 2019. 

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its highest recommendation to a pyrimethamine-based regimen for 

the treatment of acute toxoplasmosis. Pyrimethamine is the API 

of Daraprim. 

The Guidelines rank recommended treatment options for 

certain diseases with a letter and a numeral. The letter grade 

signifies the strength of the recommendation and the Roman 

numerals indicate the quality of the evidence supporting the 

recommendation. Accordingly, an A-I grade is a recommendation 

based on the strongest, highest-quality evidence derived from 

randomized control clinical trials, or, if randomized control 

trials have not been conducted, methodologically sound cohort 

studies or meta-analyses. Lower grades are given to treatment 

options that have been shown to be effective but are not 

preferred, or are based on less methodologically reliable 

studies. 

Under the Guidelines, pyrimethamine plus sulfadiazine and 

leucovorin19 is given the strongest possible recommendation for 

treating active toxoplasma encephalitis: A-I. The recommended 

dosage of Daraprim, available only as a 25 milligram tablet, is 

an initial dose of 200 milligrams (eight pills) followed by 50 

to 75 milligrams (two to three pills) daily for at least six 

19 Leucovorin is administered to mitigate pyrimethamine’s 

suppression of the bone marrow, which would decrease white and 

red blood cells if left untreated. 

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weeks. For patients who cannot tolerate a sulfa drug, the 

recommended treatment is pyrimethamine plus clindamycin. 

The pyrimethamine-based regimen is preferred to alternative 

treatments because of its efficacy and safety, long history of 

successful clinical use, superior potency in comparison to other 

treatments, and diagnostic utility when a biopsy is not 

feasible. A significant decrease in the size, inflation, or 

number of lesions in the brain following a week or more of 

treatment confirms the diagnosis. Because a biopsy of the brain 

carries extreme risks, pyrimethamine’s diagnostic utility is 

particularly important. Pyrimethamine remains the only drug 

approved by the FDA for the treatment of toxoplasmosis. And, 

until the entry of FDA-approved generic pyrimethamine in 2020, 

Daraprim was the only FDA-approved pyrimethamine product on the 

market. 

Before Vyera acquired Daraprim, it commissioned a physician 

survey to determine whether doctors “would continue to prescribe 

Daraprim” following a price hike. In response to the survey, 

doctors indicated that they considered the drug to be the 

“backbone of therapy” for toxoplasmosis and were “at a loss to 

think of an appropriate alternative.” Shkreli and others at 

Vyera recognized Daraprim as “the gold standard” therapy for 

toxoplasmosis, rendering Daraprim “essentially unsubstitutable.” 

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In April 2015, Vyera made Impax Laboratories, Inc. 

(“Impax”), then the owner of the U.S. licensing rights to 

Daraprim, an unsolicited offer of $60 million. This offer 

represented a considerable premium over Daraprim’s market value. 

Annual net sales of Daraprim constituted roughly $4 million at 

the time, and Impax assessed its net present value as $19 

million. In a transaction that closed on August 7, 2015, Vyera 

paid Impax $55 million, more than eleven times Daraprim’s 2014 

net revenues. 

B. Daraprim’s 2015 Price Hike and Vyera’s Revenues 

Until 2010, Daraprim had been owned by GlaxoSmithKline 

(“GSK”), a global pharmaceutical company based in the United 

Kingdom. Between 2011 and 2015, the new owners of Daraprim had 

raised the list price -- also called the wholesale acquisition 

cost (“WAC”) -- of a tablet from $6.74 to $17.60. These price 

increases ranged from 15% to 30% at a time. Within days of 

Vyera’s purchase of Daraprim and at Shkreli’s direction, Vyera 

raised the WAC from $17.60 to $750 per tablet effective August 

11, 2015. From roughly 2016 to 2019, the average net price of 

Daraprim (the price per tablet after subtracting discounts, 

chargebacks, and rebates off the WAC) ranged between $228 and 

$305 per tablet. Dr. Salinas testified that the price hike was 

the “poster child of everything that is considered wrong about 

the pharmaceutical industry.” 

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Comparing the nine-month period preceding and following 

Vyera’s price hike, Daraprim’s sales volume dropped by 66%. In 

September 2015, sales data from IQVIA (formerly IMS Health), a 

commercial data aggregator commonly used for market research in 

the pharmaceutical industry, indicated that the market size for 

Daraprim was around one million tablets annually. After that 

steep decline, the sales volume stabilized at roughly 200,000 to 

250,000 tablets per year between 2016 and 2019. These sales 

remained steady until the first generic pyrimethamine product 

entered the market in March 2020. 

From 2016 through 2019, Vyera made between $55 and $74 

million in annual gross profits from its sales of Daraprim. 

Daraprim revenues in the years between 2010 to 2014 had amounted 

at most to $10 million a year. Vyera’s estimated gross profit 

margin from Daraprim, calculated by subtracting Vyera’s reported 

production costs, ranged between 89% and 98% in 2016 through 

2019. The Figure below illustrates net revenue and gross profit 

for Daraprim sales between 2010 and 2020. 

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From August 2015 to the end of 2019, Daraprim sales amounted to 

over 96% of Vyera’s total revenues.20 

IV. Vyera’s Implementation of a Closed Distribution System for 

Daraprim 

Even before finalizing its acquisition of the rights to the 

drug, Shkreli made it a priority to close the Daraprim 

distribution channels. In June 2015, Shkreli directed Retzlaff, 

who ran Vyera’s sales team, to move Daraprim from retail 

distribution into a closed distribution system “as swiftly as 

possible.” As the interim project manager in charge of the 

20 In that period, Vyera earned revenue only from sales of one 

other drug, Vecamyl. 

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initiative, Mulleady ensured that Shkreli’s wishes for 

Daraprim’s closed distribution system were implemented. 

Shkreli recognized that generic entry into the 

pyrimethamine market was inevitable, but Shkreli hoped to delay 

that entry for at least three years. In July 2015, Shkreli 

remarked to an investor that he felt “very good that there are 

no incoming generics and now that it is closed distribution 

there will not be any going forward . . . even if we get 3 

years, it is a great payout.” 

Daraprim had been in open distribution from its 

introduction into the market in the 1950s until 2015. After he 

had initiated his own plans to move Daraprim into specialty 

distribution, Shkreli learned that a prior owner of Daraprim had 

already begun to do so. By the time Vyera acquired Daraprim, 

Daraprim was distributed through two wholesale distributors and 

specialty pharmacies, AmerisourceBergen Corporation (“ABC”) and 

Walgreens Specialty Pharmacy (“Walgreens”).21 Vyera continued 

the terms of the assigned contract with Walgreens and slowly 

expanded the number of distribution partners for Daraprim to 

five distributors and specialty pharmacies. They were ASD (a 

21 Impax had just transitioned Daraprim from retail distribution 

to Walgreens specialty distribution. Orders to Walgreens were 

to be fulfilled by another distribution partner that Vyera 

inherited when it acquired Daraprim, ICS, an affiliate of ABC 

and ASD. 

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subsidiary of ABC), BioRidge Pharma LLC (“BioRidge”), Cardinal, 

Optime, and Walgreens (together, the “Distributors”). Despite 

expanding the number of distribution partners, however, Vyera 

imposed class of trade restrictions in its distribution 

contracts, limiting the types of customers who could buy 

Daraprim. The end result was that no Distributor could sell 

Daraprim to a retail pharmacy or a generic drug company without 

Vyera’s approval. 

Vyera’s distribution restrictions on Daraprim were not 

justified by a need to protect either patient health or Vyera 

from lawsuits asserting that a patient had experienced an 

adverse drug reaction. As noted above, Daraprim had been sold 

through open distribution for decades. It was considered a safe 

drug; the FDA never put Daraprim in a REMS program or required a 

black box warning on the label. Daraprim is an oral tablet that 

does not require special shipping, handling, storage, or 

administration. When the first generic pyrimethamine product 

was launched in March 2020, it was sold through an open 

distribution system. 

A. Class of Trade Restrictions 

Between 2015 and 2020, Vyera’s Distributors were restricted 

to selling only to authorized customers that included government 

customers, hospitals, specialty pharmacies, and other 

specialized entities. The authorized customers or types of 

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customers approved to buy Daraprim did not include generic drug 

companies or their agents. No Distributor was permitted to sell 

Daraprim to a generic drug manufacturer or their agent without 

Vyera’s express approval. There is no evidence that Vyera ever 

gave such approval. 

Vyera’s contract with ASD, executed on September 2015, 

provides an example of the class of trade restrictions. It 

simply stated that the “Distributor may only sell Daraprim to 

Government Customers and hospitals.”22 In 2016, Vyera expanded 

ASD’s authorized customer list to include “certain state AIDS 

Drug Assistance Programs (ADAPs), subject to the Company’s prior 

written approval.” An amendment in 2018 revised the authorized 

customer clause as follows: 

Distributor may only sell Daraprim to licensed 

wholesalers and specialty pharmacies that support 

certain state [ADAPs], subject to the Company's prior 

written approval, Government Customers, hospitals, and 

‘covered entities’, as defined by Section 340B of the 

Public Health Services Act (“340B Customers”). 

[Vyera] will approve any new authorized customers via 

email and will maintain and update a monthly 

authorized customer file.23 

22 Government Customers were defined in the contract as the 

Department of Veterans Affairs or Department of Defense sites. 

23 Entities covered by § 340B of the Public Health Services Act, 

a federal discount pricing program for entities that serve 

indigent populations, may purchase prescription drugs at steep 

discounts. 42 U.S.C. § 256b. A § 340B entity was permitted to 

buy Daraprim for $1 per 100-pill bottle. 

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Effective February 25, 2020 -- just as the first generic 

competitor to Daraprim was about to receive FDA approval -- the 

authorized customer list was expanded to permit sales to “340B 

contract pharmacies, any customers on the approval list provided 

by Company, and any new customers approved by Company in writing 

(with email being sufficient).” 

Equivalent restrictions were in place for each Vyera 

Distributor. For example, as of December 2015, BioRidge was 

only authorized to distribute Daraprim to Walgreens Specialty 

Pharmacies. In 2017, Vyera entered a contract with Cardinal 

that limited distribution to hospitals, ADAPs, and § 340B 

entities. A 2018 contract with Optime permitted distribution to 

hospitals, ADAPs, government customers, health departments 

(“with a valid 340b ID”), hospital distributors (“defined as a 

distributor that supplies a single hospital system”), and 

correctional facilities. 

Vyera also had contracts with roughly a hundred hospitals 

to supply them with Daraprim directly at a discounted price so 

long as they agreed to limit their use of it to their “own use” 

and not to resell Daraprim. For example, Vyera’s agreement with 

one distinguished medical system provided that “[p]rices 

available under this Term Sheet shall only apply with respect to 

product purchased by Hospital for its ‘own use’ as that term is 

described in Abbott Laboratories Inc. v. Portland Retail 

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Druggists, 425 U.S. 1 (1976), [without regard to whether Company 

is a non-profit entity described in section 501 of the Internal 

Revenue Code].” 

B. Bottle Limits 

Vyera also controlled the distribution of Daraprim by 

imposing limits on the number of Daraprim bottles that a single 

customer could purchase at a time. For example, in December 

2015, ASD agreed to cap orders from § 340B program participants 

to five bottles “per week per order,” with any exceptions for 

larger orders requiring approval from Vyera. Vyera’s Director 

of Patient Access openly admitted that the quantity limits 

imposed in 2015 were introduced to make it harder for generic 

drug companies to acquire “large quantities” of Daraprim “in 

order to copy the drug and compete with it.” He was quoted in a 

news article published on October 5, 2015, stating that if a 

generic drug maker tried to order Daraprim, 

Most likely I would block that purchase. . . . We 

spent a lot of money for this drug. We would like 

to do our best to avoid generic competition. It's 

inevitable. They seem to figure out a way [to make 

generics], no matter what. But I'm certainly not 

going to make it easier for them. 

Vyera added similar restrictions to its contracts with 

other Distributors. For example, under its 2018 contract with 

Optime, “[a]ll orders greater than 3 bottles require[d] Vyera 

approval.” 

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As the entry of generic competition became more imminent, 

Shkreli urged that the limits on the sale of Daraprim bottles be 

further tightened. On August 8, 2019, while incarcerated 

following his conviction for securities fraud, Shkreli was 

recorded asking Mithani about the likelihood that a doctor could 

order more than one bottle of Daraprim at a time. When Mithani 

responded that it is “very likely”, Shkreli responded that 

“that’s what I’ve been stressing to you guys for the last three 

years, to look at that very carefully, you know, meet those 

doctors.” Shkreli went on to say “there has to be some way to 

tighten the supply chain a bit . . . I just want to make sure 

you guys are doing everything you can.” When Mithani told 

Shkreli that Vyera “can’t say no” to hospitals, Shkreli 

responded, “Okay. Well, that’s a shame.” 

Just days before, upon learning of the efforts made by the 

generic pharmaceutical company Fera to purchase Daraprim RLD, 

Shkreli had urged Vyera to limit all sales of Daraprim to one 

bottle at a time. Shkreli told Mulleady that 

the company should, you know, just make sure it really 

doesn’t sell more than one bottle at a time, you know. 

That would be -- the number one thing I would do and 

just really screen every doctor that, you know -- even 

if it drops sales a little bit, it’s a good -- you 

know, really make sure he’s [referring to Fera’s 

owner] not getting his hands on anything. 

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C. Surveillance 

Vyera monitored its Distributors’ daily and weekly sales 

reports to prevent the diversion of Daraprim to generic drug 

companies for BE testing. It promptly followed up on any sales 

it considered unusual to stop any leakage. 

The monitoring began as soon as Vyera acquired Daraprim. 

For example, on August 13, 2015 -- just two days after the 

Daraprim price hike -- Vyera saw a sales report from ICS 

reflecting a sale of 40 bottles to a customer. Vyera asked ICS 

to cap the maximum number of bottles sold to any one customer, 

explaining Vyera’s 

concern that a generic company could access multiple 

bottles of our product, perhaps attained through a 

hospital reselling it or distributing product to 

surrounding retail pharmacies, and use it to create a 

generic version. 

In response, ICS agreed to limit sales to five bottles at a 

time. Shkreli was informed of the “[n]eed to investigate the 40 

unit buy.” 

Vyera repeatedly instructed its Distributors to refrain 

from selling Daraprim to potential competitors for clinical 

trials. For example, in February 2017, a company that obtains 

RLD for generic pharmaceutical companies ordered a 30-count 

bottle of Daraprim from ASD. ASD advised Vyera that it had 

denied the request due to “the conversation around generics.” 

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Later in 2017, Vyera directed ASD to rebuff another company that 

reached out to ASD to buy Daraprim for use in a clinical trial. 

The speed and effectiveness of Vyera’s surveillance system 

is dramatically illustrated by its interception of five bottles 

of Daraprim intended for a generic drug distributor -- Dr. 

Reddy’s -- in April 2018. On April 5, ASD delivered the five 

bottles to a pharmacy pursuant to an order placed on April 4. 

Vyera’s surveillance system flagged the purchase on April 5, 

investigated the purchaser, learned the bottles were destined 

for a company that supplies RLD for bioequivalence and clinical 

trials, and by April 6, Mulleady met with the company’s owner in 

a parking lot to repurchase the bottles for $750,000. This was 

twice the price the pharmacy had paid for the bottles. 

Vyera’s frantic interception of this purchase prompted it 

to lock down Daraprim distribution even more strictly. Vyera 

instructed ASD to block that pharmacy’s access to any Daraprim. 

It then dramatically shrank the number of customers to which ASD 

and Cardinal were permitted to sell Daraprim without specific 

prior authorization from Vyera. For ASD, this resulted in a 

reduction of approved customers from approximately 13,000 to 

roughly 555. Vyera similarly cut Cardinal’s list of approved 

accounts from about 14,700 to fewer than 1,500. Vyera also 

reduced the number of bottles that ASD could sell to any one of 

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the pre-approved customers, reducing the number to four bottles 

unless the customer was a § 340B customer. 

D. Benefits to Distributors 

The Distributors benefitted financially from their 

contracts with Vyera despite the restrictions on their sales of 

Daraprim. This was true for as long as Daraprim was sold at a 

high price. Vyera compensated the Distributors with either a 

fixed fee (Optime) or a percentage of WAC based on volume sold 

(ASD, Cardinal, BioRidge, and Walgreens). ASD, for example, 

received $2,062.50 for each 100-count bottle of Daraprim it 

sold. By contrast, when Dr. Reddy’s launched its generic 

pyrimethamine product in March 2020, it offered ASD’s parent 

company a price of only $877.50 per bottle. 

V. Vyera’s Restriction of Access to the API Pyrimethamine 

Besides blocking access to the Daraprim that generic drug 

manufacturers needed to conduct BE testing, Shkreli also worked 

to block their access to pyrimethamine, the API in Daraprim. He 

was well aware that the sooner a generic company could find an 

established API manufacturer the sooner it could launch a 

generic version of Daraprim. Vyera locked up the supply of 

pyrimethamine to U.S.-based generic drug companies through 

exclusive supply agreements with the two most attractive 

pyrimethamine suppliers: Japan’s Fukuzyu Pharmaceutical Company 

(“Fukuzyu”) and India’s RL Fine. 

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A. Fukuzyu 

Fukuzyu, an established and prominent Japanese chemical 

manufacturer, was the long-term supplier of pyrimethamine for 

Daraprim. Fukuzyu had been producing pyrimethamine since 1966, 

had held a DMF for pyrimethamine since 1992, and is the 

manufacturer referenced in Daraprim’s NDA. The only other 

manufacturer to have filed a pyrimethamine DMF, Ipca, had lost 

its right to sell pyrimethamine in the United States in 2015.24 

Fukuzyu typically requires a customer to provide an 

estimate of how much API it will require for a given period. 

Such clauses mitigate a purchaser’s supply risk and help Fukuzyu 

manage its production schedule. 

Fukuzyu’s contract with GSK, for example, requires GSK to 

produce forecasts of how much API it will need for a defined 

period and requires Fukuzyu to deliver that amount. GSK holds 

the worldwide rights to Daraprim outside of North America. The 

contract states that GSK “[s]hall provide [Fukuzyu’s] Agent with 

a rolling forecast schedule of demand showing their estimated 

requirements for PYRIMETHAMINE for the following twelve (12) 

months (‘Forecast Schedule’),” and “[t]he Product detailed in 

the first 3 months (‘Firm Order Period’) of each Forecast 

Schedule will represent firm orders for PYRIMETHAMINE” to which 

24 The FDA imposed an import ban on Ipca in 2015. 

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Fukuzyu must respond within five days. “[E]ach Firm Order will 

be regarded by the Parties as a binding irrevocable commitment” 

to purchase pyrimethamine from Fukuzyu, which in turn obligates 

Fukuzyu to manufacture enough API to meet the order. The GSK 

contract also requires Fukuzyu to ensure that it has “at all 

times sufficient manufacturing capacity to meet [GSK]’s . . . 

requirements for PYRIMETHAMINE as shown in the Forecast 

Schedule.” GSK’s contract with Fukuzyu does not include an 

exclusivity clause. 

Impax, the company from which Vyera purchased Daraprim, had 

purchased pyrimethamine from Fukuzyu through a broker without 

even entering into a supply contract. Shkreli was immediately 

interested in reversing that practice. He wanted an exclusive 

supply agreement with Fukuzyu. With the help of a consultant, 

Vyera eventually succeeded by representing that it had several 

ambitious projects and hoped to use Fukuzyu as a long-term API 

supplier for each of those projects. In October 2016, three 

Vyera executives traveled to Japan to visit Fukuzyu. They were 

Pelliccione, then Vyera’s Senior Vice President for Regulatory 

Affairs, Dr. Salinas, and Vyera’s Head of Chemistry, 

Manufacturing, and Controls. 

Vyera bluntly explained to Fukuzyu that it needed an 

exclusive supply contract to prevent generic Daraprim from 

entering the United States market. In November 2016, Dr. 

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Salinas directed Vyera’s consultant to inform Fukuzyu that “[i]f 

generic products are put on the U.S. market” Vyera will face a 

“serious problem, and may eventually terminate the marketing of 

Daraprim as well as the R&D in toxoplasmosis”; that generic 

pyrimethamine “will hamper” Vyera’s plans to develop new 

pharmaceutical products and “may leave toxoplasmosis as a 

forgotten disease with insufficient therapeutic effects”; and 

that Vyera’s plans are “ONLY POSSIBLE” if Vyera has exclusive 

access to Fukuzyu’s API. The consultant was also to stress that 

Fukuzyu would “not benefit” if generic companies sold 

pyrimethamine in the U.S. market since generic companies would 

sell pyrimethamine at a “significantly lower” price. 

By November 22, 2016, Fukuzyu had agreed not to sell 

pyrimethamine “to generic companies.” According to Vyera’s 

consultant, Fukuzyu’s CEO was particularly pleased that Vyera 

planned to “develop four more new compounds and would like 

[Fukuzyu] to work together” with it on those compounds.25 

On January 25, 2017, Phoenixus entered into a three-year 

exclusive supply agreement with Fukuzyu. The exclusivity term 

states that 

[Fukuzyu] shall provide the API Bulk Drug Substance, 

pyrimethamine exclusively to [Phoenixus] for the use, 

25 As of 2021, Vyera has filed investigative new drug 

applications (“INDs”) for new potential drugs but has not 

launched any new product. 

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sale, and/or distribution in the Territory. To be 

clear, the use, sale, and/or distribution of 

pyrimethamine described in this section refers to the 

use, sale, and/or distribution of the API Bulk Drug 

Substance for humans only.26 

The Territory was defined as the United States. 

The Fukuzyu contract also provided that the minimum 

purchase quantity of pyrimethamine was 50 kilograms. Vyera, 

which contracts for the manufacture of pyrimethamine, needs 35 

kilograms for a batch of Daraprim to be manufactured. Since 

executing the exclusive supply agreement, Vyera has twice 

purchased pyrimethamine from Fukuzyu. 

The agreement with Fukuzyu does not ensure that Vyera will 

have a supply of pyrimethamine or require Fukuzyu to prioritize 

Vyera’s orders over those from its other customers. It does 

not, for instance, require Vyera to forecast its API 

requirements or obligate Fukuzyu to reserve any quantity of 

pyrimethamine or manufacturing capacity to produce 

pyrimethamine. It does not even require Fukuzyu to fill a Vyera 

order. 

Under the agreement, Vyera must submit a purchase order to 

Fukuzyu. If Fukuzyu does not acknowledge the order in writing 

26 Since Fukuzyu sells pyrimethamine to a veterinary drug company 

that uses it to produce drugs for horses in the United States, 

there was a carveout permitting Fukuzyu to continue selling the 

API to other U.S. drug companies for use in animals. 

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within ten days, it has no obligation to fill the order. The 

agreement states that: 

[Daraprim] is historically a low volume product for 

[Vyera]. Due to the infrequent need to manufacture 

[Daraprim], [Vyera] will provide [Fukuzyu] a Firm 

Order for API, in the form of a Purchase Order. 

Receipt of the Purchase Order denotes [Vyera]’s 

binding request to purchase API within 180 days of 

date of Purchase Order. [Fukuzyu] will accept Firm 

Orders by sending an acknowledgement to [Vyera] 

within 10 business days of its receipt of the Firm 

Order. 

What Vyera obtained through its agreement with Fukuzyu was 

the right to bar other buyers, and Vyera strictly enforced that 

right. For example, in November 2017, Fukuzyu inquired whether 

it could sell pyrimethamine to a company that intended to resell 

it to a U.S.-based pharmaceutical company for a drug to be sold 

in South America. Vyera asked Fukuzyu to include in the sales 

agreement that the API sold to the US company “will not be used 

to make pyrimethamine drug product, for human use, that will 

find its way back to the US for commercial purposes,” and “that 

the API will ONLY be used for drug products sold and used in 

South America.” Fukuzyu agreed. 

B. RL Fine 

As of 2015, most generic drug companies would have sought 

to purchase pyrimethamine from Fukuzyu. Vyera closed off that 

avenue of supply with its exclusive supply agreement with 

Fukuzyu. After Fukuzyu, RL Fine was the second most attractive 

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source of supply. In 2017, after Shkreli learned that generic 

companies were going to obtain pyrimethamine from RL Fine, he 

moved quickly to cut off that source of supply as well. 

RL Fine is based in Bangalore, India and had been 

manufacturing pyrimethamine since at least 2004. RL Fine sells 

pyrimethamine directly to customers; it does not use 

distributors. As of 2016, RL Fine had a European pyrimethamine 

DMF but had not filed a U.S. DMF. 

In 2017, in defending against an investigation that 

preceded the filing of this lawsuit, Vyera emphasized the 

importance of RL Fine to generic drug manufacturers. It 

downplayed the significance of its exclusive supply agreement 

with Fukuzyu in a letter to the Office of the New York Attorney 

General dated May 5, 2017, by asserting that “generics 

manufacturers can obtain pyrimethamine API from a variety of 

sources, even without the option to purchase it from Fukuzyu”. 

It cited RL Fine as one of those alternatives. Vyera explained 

that 

the cost for a potential competitor to qualify API 

from the European DMF holder RL Fine Chemicals would 

be less than $100,000, as the company has already 

validated its production process and has a DMF ready 

to file in the United States. Such a cost can 

hardly be deemed a barrier to entry, especially when 

viewed as part of the overall process of drug 

development. 

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Yet when Vyera learned from its consultant on August 7, 

2017, that two generic drug companies, Mylan and Sandoz, were 

planning to buy pyrimethamine from RL Fine, Shkreli acted 

quickly to block their access. On August 24, Shkreli drafted an 

email from prison for Mithani to send to RL Fine. The email 

represented that Vyera was “looking to purchase 10-20kg/annually 

of pyrimethamine API with a US DMF” for a “combination product 

with leucovorin.” Mithani sent Shkreli’s drafted email to RL 

Fine verbatim. RL Fine replied that it was “already working on 

pyrimethamine and would not be able to offer [it] to you.” 

Vyera was undeterred and continued to negotiate with RL Fine. 

In October 2017, Vyera received independent confirmation 

from executives attending a trade conference in Frankfurt that 

RL Fine was supporting generic drug companies that would soon 

file ANDAs. On October 25, Shkreli texted Mulleady from prison 

using a contraband phone:27 “its shkreli -- trying to get in 

touch with you urgently -- hearing pyri ANDA approval in 

december 2017.” 

Within eight days of that email, on November 2 Mulleady 

offered RL Fine $1,250,000 per year and other financial 

27 For a period of time, Shkreli had a contraband phone in prison 

that he used to communicate with, among others, Mulleady and 

Mithani. Fed. Trade Comm'n v. Vyera Pharms., LLC, No. 20CV00706 

(DLC), 2021 WL 2201382 (S.D.N.Y. June 1, 2021). 

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enticements “to formalize our exclusive agreement” for 

pyrimethamine API. In late November, Mulleady and Mithani flew 

to India to meet with RL Fine. By November 25, Vyera and RL 

Fine had agreed on the terms of an exclusive supply agreement. 

Vyera made no bones about its motive for entering this 

exclusive supply agreement. It needed to block the access of 

generic manufacturers to RL Fine pyrimethamine. The minutes of 

the December 15, 2017 Phoenixus board meeting present the 

rationale for Vyera’s costly agreement with RL Fine as “the 

potential market entry by generics manufacturers and 

distributors.” According to the minutes, “one or two potential 

competitors are currently in the process of preparing their 

market entry.” The minutes report that Mulleady and Mithani, by 

then Board members of Phoenixus and in control of the company’s 

management functions, believed “addressing potential generic 

competitors are in the Vyera Group’s interest” and justified the 

extraordinary price Vyera agreed to pay RL Fine. 

On December 17, Vyera executed two contracts with RL Fine: 

A Distribution and Supply Agreement (“Supply Agreement”) and a 

Product Collaboration Agreement (“Collaboration Agreement”). 

The twenty-five-page Supply Agreement gave Vyera “the exclusive 

right to sell, distribute, and market” RL Fine’s pyrimethamine 

for five years and limited RL Fine to selling pyrimethamine for 

use outside India only “with the consent” of Vyera. 

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In return, Vyera paid RL Fine $1 million “towards expenses 

for filing the US” DMF for pyrimethamine. Vyera also agreed to 

pay RL Fine royalty payments in the amount of 7.5% of net 

revenues on its sales of Daraprim, with a guaranteed minimum 

payment of $3 million. Under the Supply Agreement, Vyera’s 

obligation to make royalty payments other than the guaranteed 

amount of $3 million would terminate if and when a generic 

pyrimethamine product entered the U.S. market. 

Under the Collaboration Agreement, which had a one-year 

term, Vyera paid a non-refundable $1 million towards R&D 

expenses and preparation of a DMF. The Collaboration Agreement 

acknowledged the parties’ Supply Agreement. 

Having signed the Supply Agreement, RL Fine stopped 

supplying pyrimethamine to the generic drug manufacturers 

Cerovene and InvaTech. Vyera has paid RL Fine approximately 

$300,000 to $450,000 a month in royalty payments. By October 

2019, Vyera had paid RL Fine almost $7 million in monthly 

royalty payments alone, and almost $9.5 million in total. 

Vyera’s payments to Fukuzyu pale in comparison. Over this time 

period, Vyera has paid Fukuzyu approximately $500,000. 

Neither the Supply Agreement nor the Collaboration 

Agreement required RL Fine to file a DMF with the FDA or 

conditioned any payment on RL Fine completing any of the steps 

necessary to file a U.S. DMF. RL Fine never paid even the 

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$57,795 DMF filing fee to the FDA, despite receiving $1 million 

from Vyera to do so, or took any other steps toward filing a DMF 

for pyrimethamine. Similarly, Vyera never sought FDA approval 

to use RL Fine’s API in Daraprim, or took any other steps to be 

able to use RL Fine as a backup supplier of pyrimethamine. 

Pelliccione, Vyera’s executive in charge of regulatory matters, 

didn’t even know of the RL Fine contract until he was preparing 

for this trial. It had never even crossed his mind that Vyera 

needed a second source for pyrimethamine. In sum, Vyera 

received nothing in return for the millions of dollars it paid 

to RL Fine except the foreclosure of generic competitors’ access 

to RL Fine’s pyrimethamine. 

Facing regulatory pressure, on October 20, 2019, Vyera paid 

RL Fine $750,000 to terminate the Supply Agreement. RL Fine 

threatened to speak to the FTC if it did not get a termination 

fee. 

VI. Delay of Generic Entry 

Shkreli’s efforts to delay the entry of generic competition 

to Daraprim succeeded. The following chart sets out the dates 

on which the four generic manufacturers filed their ANDAs, and 

the dates on which three of those ANDAs were approved. 

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Generic ANDA Filed Approved Time to 

Approval 

Cerovene/Dr. 

Reddy’s 

5/8/2014 2/28/2020 70 months 

InvaTech 7/28/2017 Pending as 

of January 

2022 

53+ months 

Fera 12/19/2019 7/27/2021 31 months 

Teva 

Pharmaceuticals 

1/27/2021 8/13/2021 7 months 

Vyera’s multifaceted campaign to delay the entry of generic 

pyrimethamine succeeded in substantially delaying the entry of 

at least Cerovene and Fera. Vyera made it exceedingly difficult 

for each of them to obtain the pyrimethamine API and a 

sufficient quantity of Daraprim RLD for BE testing. 

A. Barriers to Entry 

As of 2015 only two API suppliers held a pyrimethamine DMF 

in the United States: Fukuzyu and Ipca. Fukuzyu was the longterm supplier of the API for Daraprim. Because Ipca’s supply of 

pyrimethamine became subject to an FDA-imposed import ban, 

Fukuzyu was the only option for any pharmaceutical company in 

the United States seeking a pyrimethamine API supplier that held 

an active DMF. 

RL Fine was the next-best option for a supply of 

pyrimethamine for generic drug companies seeking to compete with 

Daraprim because it was familiar with the FDA’s requirements; it 

had DMFs on file with the FDA for other APIs. In addition, it 

marketed its drug products globally, already manufactured 

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significant quantities of pyrimethamine, and held a European 

pyrimethamine DMF. Possession of a European DMF typically 

indicates that one can also meet U.S. DMF standards. 

With its exclusive supply agreements, Vyera blocked access 

to these two sources of API. Shkreli began efforts to obtain an 

exclusive supply agreement with Fukuzyu in 2015. Vyera and 

Fukuzyu came to terms in November of 2016 and executed their 

contract in January of 2017. In 2017, at Shkreli’s urging, 

Vyera also entered into an exclusive supply agreement with 

RL Fine. It paid RL Fine millions of dollars to do so. 

Shkreli also cut off access to the RLD that generic drug 

companies needed to do the BE testing required for FDA approval 

of an ANDA. Understanding the importance of access to the RLD, 

Shkreli adopted a closed distribution system for the sale of 

Daraprim. This was the model he had adopted at Retrophin to 

block generic competition to Retrophin’s pharmaceuticals. 

Against this backdrop, several generic drug companies 

worked for years to obtain an API supplier and quantities of the 

RLD, a process that in the ordinary course should have taken 

weeks. Cerovene was the first to get its ANDA approved and its 

efforts to obtain an API supplier and the requisite RLD will be 

described first. Fera’s path to entering the market will be 

described next. Finally, there will be brief descriptions of 

the experiences of InvaTech and Mylan. 

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B. Cerovene and Dr. Reddy’s Laboratories 

Cerovene, a pharmaceutical research and development firm 

founded in 2006, is focused on the development of generic drugs. 

Cerovene does not manufacture API, but manufactures the finished 

drug product, creates the documents necessary to submit the ANDA 

to the FDA, works with the FDA to gain approval, and produces a 

finished product for distribution after approval. 

Dr. Reddy’s is Cerovene’s generic pyrimethamine marketing 

partner. Dr. Reddy’s is a large multinational pharmaceutical 

company that sells about 150 drug products, primarily generic 

versions of innovator drugs (that is, the first FDA-approved 

drug created containing a specific API). As it did with 

Cerovene, Dr. Reddy’s often licenses a third party’s developed 

drug or partners with a third party to develop a drug for Dr. 

Reddy’s to bring to market. After a seven-year effort, Cerovene 

received FDA approval of its ANDA for generic pyrimethamine on 

February 28, 2020, and Dr. Reddy’s launched the generic product 

on March 20, 2020. 

Cerovene began developing generic Daraprim in 2013 and 

submitted its ANDA to the FDA on May 8, 2014. It expected that 

a generic version of Daraprim would be profitable based on the 

price of Daraprim at the time, which was approximately $12 per 

tablet. In late 2015, Dr. Reddy’s explored developing a generic 

version after Vyera dramatically hiked up Daraprim’s price. It 

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learned in March 2016 that Cerovene had already filed an ANDA, 

and on January 3, 2017, Dr. Reddy’s and Cerovene entered into a 

licensing agreement. 

In evaluating the market opportunity of generic Daraprim, 

Dr. Reddy’s conservatively expected that Cerovene’s ANDA would 

be approved by August 2017, with the product launch occurring by 

early 2018. Dr. Reddy’s also projected that Cerovene’s generic 

would launch at a 55-70% discount off Daraprim’s list price 

(depending on how many other generic competitors entered the 

market) and expected to take a significant fraction of the 

branded drug’s sales. 

Cerovene’s experience in acquiring RLD to support its 2014 

ANDA was typical of the process generic drug companies generally 

encounter. Cerovene had done the BE testing that it included in 

its May 2014 ANDA with nine 100-tablet bottles of Daraprim that 

it had purchased in 2013 from an independent pharmacy for a 

total price of just over $10,000. Shah, Cerovene’s co-founder 

and President, recalled that it had taken approximately one day 

for the pharmacy to acquire the nine Daraprim bottles on 

Cerovene’s behalf. 

Cerovene then encountered a setback. It had planned to 

obtain pyrimethamine from Ipca and had referenced Ipca’s DMF in 

its ANDA, but the 2015 FDA import ban on Ipca’s products 

required it to find a new supplier. In October 2015 and March 

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2016, Cerovene and Ipca wrote letters to the FDA seeking an 

exemption to the import ban for Ipca-manufactured pyrimethamine. 

The FDA denied the requests on April 15, 2016. 

Meanwhile, Cerovene attempted to purchase 50 kilograms of 

pyrimethamine from Fukuzyu. Cerovene first contacted Fukuzyu in 

2015, and Fukuzyu supplied a sample of pyrimethamine for 

Cerovene to assess for suitability. By September 2016, Shah 

believed that Fukuzyu had agreed to supply Cerovene with 

pyrimethamine to develop its generic product. But in October --

the same month that Vyera executives visited Japan -- Fukuzyu 

refused to supply the API. In a letter to Cerovene dated 

October 4, 2016, Fukuzyu explained that it would not supply 

pyrimethamine “to anyone because of low business potential and 

high risk associated with the business.” Yet, as described 

above, Fukuzyu executed an exclusive supply agreement with Vyera 

in January 2017. 

Cerovene promptly turned its sights on RL Fine as the nextbest option. Although RL Fine did not have an FDA-approved DMF 

for pyrimethamine, Cerovene considered it a promising 

alternative supplier due to its experience manufacturing 

pyrimethamine for use outside the U.S. and because it held DMFs 

for other products. 

On November 16, 2016, Cerovene and RL Fine executed a fiveyear supply agreement. The agreement obligated RL Fine to 

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provide a pyrimethamine DMF that would be referenced in an 

amendment to Cerovene’s ANDA. In return, Cerovene paid RL Fine 

$100,000, with another $100,000 due upon approval of its ANDA. 

Cerovene’s agreement with RL Fine had an exclusivity 

provision. That provision was intended to protect Cerovene’s 

investment in getting RL Fine qualified as an API supplier in 

the United States and forestall free riding by other generic 

drug companies on Cerovene’s investment. RL Fine confirmed that 

it would support Cerovene’s pyrimethamine ANDA in early 2017 and 

supplied 33.5 kilograms of API, which was enough for Cerovene to 

test and launch its product. 

On April 2, 2017, Cerovene submitted a major amendment to 

its ANDA changing its API supplier from Ipca to RL Fine. In the 

amendment, Cerovene informed the FDA that RL Fine had been 

manufacturing pyrimethamine on a commercial basis in European 

and Asian markets and noted that the FDA had inspected RL Fine 

as recently as June 2015. Cerovene included RL Fine’s 

manufacturing information as an amendment to its ANDA instead of 

relying on RL Fine to handle the DMF process separately. This 

appeared to Cerovene to be the fastest way to get FDA approval. 

Because of the switch in supplier from Ipca to RL Fine, the 

FDA issued a complete response letter to Cerovene’s amended ANDA 

dated December 26, 2017, requiring Cerovene to conduct new BE 

testing using RL Fine’s API and an unexpired lot of RLD. New BE 

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testing was the only substantial correction required by the FDA, 

but the Daraprim that Cerovene had purchased in 2013 had 

expired, so Cerovene immediately tried to buy five more bottles. 

Cerovene made an extensive search for the RLD that proved 

futile. It tried and failed to acquire RLD from five different 

suppliers, on occasion making simultaneous prepayments. It made 

multiple applications to the FDA requesting partial waivers of 

the BE retesting requirement. After roughly twelve months of 

effort, Cerovene had purchased only three bottles of Daraprim. 

It did so in November 2018 at a total cost of $375,000. 

Cerovene first sought RLD on December 29, 2017, from the 

pharmacy that had supplied it with Daraprim bottles in 2013, but 

the pharmacy was no longer able to supply it with Daraprim. The 

next day, Cerovene ordered five bottles at a cost of $112,000 

each from another pharmacy but cancelled the order in February 

2018 when the pharmacy proved unable to fill the order. 

On January 22, 2018, Cerovene asked the FDA to reconsider 

its new BE testing requirement due to its difficulty acquiring 

Daraprim RLD. Cerovene explained that “the RLD is inaccessible 

and unavailable in the US for BE or other testing because it is 

the subject of a restricted distribution program.” On June 29, 

2018, the FDA denied Cerovene’s requests to conduct new BE 

testing by using its expired lots of Daraprim or to conduct 

alternative studies. The FDA noted that it “did not have 

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additional recommendations that can address the issue of RLD 

inaccessibility” and that “Daraprim is not subject to a REMS, 

and the restrictions on supply of Daraprim described in your 

letter are not required by the [FDA].” The agency added, 

If you have been unable to obtain supplies of the 

drug from the manufacturer or other distributers, 

and you believe this refusal constitutes 

anticompetitive behavior, we encourage you to raise 

the matter with the Federal Trade Commission, which 

is responsible for addressing anticompetitive 

practices. 

Throughout 2018, Cerovene struggled to find a distributor 

that could deliver sufficient RLD. Dr. Reddy’s did not 

typically help its partners procure RLD but by the end of 

January, it had stepped in to aid Cerovene. As a far larger 

company, Dr. Reddy’s believed that its connections might work. 

Dr. Reddy’s efforts included prepaying $550,000 in March 

2018 to Reliant for five bottles of Daraprim. Reliant is a New 

Jersey-based pharmaceutical wholesale company that “procure[s] 

branded Innovator Samples/Reference Listed Drugs for 

bioequivalence and clinical trials.” Reliant, however, was 

unable to purchase any Daraprim from its normal sources. 

When Reliant tried to buy Daraprim bottles from ASD, ASD 

directed Reliant to place its order directly with Vyera. Vyera 

never responded to Reliant’s request for five bottles. 

Relying on a family connection, Reliant turned to a small 

New Jersey pharmacy and arranged for the pharmacy to order five 

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bottles of Daraprim from ASD. As described above, Vyera 

immediately flagged that transaction and hurried to repurchase 

the five bottles for twice their purchase price during a meeting 

in a Starbucks parking lot in New Jersey. 

The pharmacy had placed its order with ASD on April 4, 2018 

for five bottles, which were delivered the next day. Vyera’s 

Kirby emailed ASD on April 5 to verify that the pharmacy was an 

“approved account type[]” and requested that ASD put a hold on 

the pharmacy’s account for “placing further orders until we can 

determine if there is alignment with our distribution model.” 

ASD answered that it had approved the sale in error and 

confirmed that the purchase could not be stopped as the bottles 

had already shipped. A Vyera employee then called the pharmacy 

and spoke to the owner. 

Vyera repurchased the five bottles for $750,000 on April 6, 

2018. Vyera’s CEO Mulleady drove to Parsippany, New Jersey to 

meet Reliant’s owner in a Starbucks parking lot and repurchased 

the bottles. Mulleady also handed the owner of Reliant a draft 

contract titled “Product Purchase and Collaboration Agreement.” 

The document proposed that Reliant and its affiliates “agree not 

to purchase, directly or indirectly, or their own account or on 

account of others, or to cause or direct any third party to 

purchase, directly or indirectly, any Daraprim, except directly 

through normal commercial channels.” Reliant never signed the 

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document. Despite its continuing efforts, Reliant only 

delivered one bottle of Daraprim in June of 2018. 

Cerovene and Dr. Reddy’s also used a Swiss distributor, 

ProSupplier GmbH (“ProSupplier”), which also required an advance 

payment to begin locating Daraprim RLD. Cerovene and Dr. 

Reddy’s initially resisted prepaying both Reliant and 

ProSupplier for RLD that may never materialize; they had also 

heard that ProSupplier was in fact attempting to obtain Daraprim 

through Reliant. As more time passed, however, Dr. Reddy’s and 

Cerovene decided to accept the risk of holding open two orders 

at the same time and prepaid $375,000 to ProSupplier in 

September for three bottles of Daraprim, with another $375,000 

to be paid after delivery. 

ProSupplier delivered three bottles of Daraprim in November 

2018, but as they came from a different manufacturing lot than 

the one bottle obtained by Reliant, the four bottles could not 

be combined to meet the FDA’s BE testing and the RLD retention 

requirements. With the three bottles in hand, Dr. Reddy’s 

cancelled its outstanding order with Reliant. 

Cerovene had written the FDA again in July 2018 to stress 

that Daraprim appeared to be subject to a restricted 

distribution program and was inaccessible in the United States. 

It requested a reduction in the amount of RLD needed for BE 

testing and retention. In April 2019, the FDA permitted 

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Cerovene to conduct BE testing with just the three bottles of 

Daraprim that it had been able to acquire from ProSupplier. 

Meanwhile, due to Vyera’s interference, Cerovene was forced 

to search for yet another API supplier. During a November 30, 

2017 meeting in India, RL Fine informed Cerovene’s Shah that, 

notwithstanding their five-year contract, it would no longer 

supply Cerovene with any more pyrimethamine. 

Cerovene returned to Ipca, which had acquired another 

company with manufacturing facilities. Cerovene executed a 

supply agreement on February 19, 2019, that was conditioned on 

FDA approval of Ipca’s affiliate as Cerovene’s API supplier. 

Cerovene invested in developing the company’s pyrimethamine 

manufacturing capacity from scratch, but even with Ipca 

transferring its manufacturing process, it took until late 2019 

for the company to provide Cerovene with the materials necessary 

to supplement its ANDA. 

From May to June 2019, Cerovene proceeded to conduct BE 

testing using the RL Fine API that it had received in 2017 and 

the three bottles of Daraprim obtained from ProSupplier in 

November 2018. It submitted its results to the FDA in September 

2019. Then, on February 25, 2020 -- after Vyera terminated its 

exclusive agreement with RL Fine in October 2019 -- RL Fine 

agreed once more to supply Cerovene with pyrimethamine pursuant 

to their 2016 agreement. Three days later, Cerovene’s generic 

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pyrimethamine product received FDA approval and an AB rating to 

Daraprim. Dr. Reddy’s launched the generic on March 20, 2020. 

Cerovene began manufacturing commercial batches of generic 

pyrimethamine using RL Fine’s API in 2021. 

Vyera delayed Cerovene’s entry into the market by roughly 

thirty months, that is, from September 2017 to its actual entry 

date of March 2020. This timeline is premised on Cerovene 

having been able to obtain API from Fukuzyu in October 2016 and 

being able to obtain Daraprim without any delay. Cerovene, as 

explained at trial by its principal, would have needed 

approximately eleven months to obtain approval for an amended 

ANDA in these circumstances.28 Shah testified that it would have 

taken one month to manufacture a registration batch of the 

generic drug product. He would have redone the BE testing 

during the three-month period needed for stability testing. He 

predicted that he would have filed an amended ANDA changing 

Cerovene’s API supplier to Fukuzyu in or around February 2017. 

Assuming that the FDA would have taken six months to review of 

Cerovene’s amendment, it would have approved Cerovene’s ANDA by 

August 2017. Dr. Reddy’s would have launched Cerovene’s FDAapproved generic pyrimethamine one month later, by September 

2017. 

28 Shkreli did not challenge this testimony at trial. 

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As was true when Dr. Reddy’s actually launched Cerovene’s 

generic competitor to Daraprim in 2020, the effect of the entry 

of FDA-approved generic pyrimethamine on the price of Daraprim 

would have been immediate. Upon the entry of the Dr. Reddy’s 

generic product, Vyera began to compete on price by offering 

steep rebates and brand-for-generic deals to various pharmacies 

and pharmaceutical benefit managers.29 

C. Fera 

The second pharmaceutical company to bring FDA-approved 

generic pyrimethamine to the market is Fera. Fera is based in 

Locust Valley, New York, and develops generic and branded drugs. 

DellaFera founded Fera in 2009 to develop niche products that 

face barriers to entry and are often overlooked by the 

pharmaceutical industry. 

Fera is a virtual drug company, which means that it does 

not have its own manufacturing capacity; it contracts with other 

manufacturers to produce its products. When developing a new 

drug, Fera usually partners with reputable API suppliers that 

have experience complying with the FDA’s cGMPs regulations. 

29 A brand-for-generic rebate is a rebate offered on the price of 

a brand name drug by a pharmaceutical company in exchange for a 

pharmacy agreeing to dispense the brand name drug in lieu of the 

generic version when filling prescriptions. The end payer pays 

the generic cost of the copay despite receiving the brand name 

drug. 

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In September 2015, Fera decided to develop generic 

pyrimethamine after learning about Vyera’s Daraprim price hike 

in the media. After confirming that about one million tablets 

of Daraprim were being sold per year at the time, Fera began to 

search for API suppliers holding a U.S. DMF for pyrimethamine. 

In February 2016, Fera inquired of Fukuzyu about purchasing 

pyrimethamine. Fukuzyu did not respond. 

On June 13, 2016, Fera entered into an agreement with 

another manufacturer to develop a pyrimethamine API 

manufacturing process exclusively for Fera’s use. That 

manufacturer had never made pyrimethamine. Fera invested about 

$2 million for the development of a pyrimethamine manufacturing 

process. The company completed its work in October 2017.30 

Meanwhile, Fera continued its efforts to acquire the API 

from an already established source. Despite its investment in 

an API development process, Fera understood that its ANDA would 

be approved more quickly if it relied on a supplier that already 

had an FDA-approved pyrimethamine DMF. 

In September 2017, Fera reached out to Fukuzyu a second 

time. Fera sought a sample of pyrimethamine API to test against 

the API being produced by its manufacturing partner, and also 

30 Due to the difficulty obtaining RLD, Fera did not begin 

working on a DMF until late 2018. It filed the DMF on May 28, 

2019. 

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hoped that Fukuzyu would agree to become its pyrimethamine 

supplier for generic Daraprim. That proved to be impossible. 

At Vyera’s direction, Fukuzyu’s agent told Fera that it had to 

guarantee that Fukuzyu’s pyrimethamine would not be used in a 

drug for human use in the United States “either via normal 

prescription drug distribution” or via compounding.31 

In the Fall of 2016, Fera also sought to purchase Daraprim 

RLD for BE testing and to use as a comparator with the product 

being produced by its manufacturing partner. Its efforts were 

largely fruitless. 

On November 7, 2016, Fera’s McDougal reached out to 

Pharmaceutical Buyers, Inc. (“PBI”), a distributor, to acquire 

samples of Daraprim. PBI responded that Daraprim was “only 

available to hospitals and government facilities at this time.” 

McDougal next inquired of a hospital pharmacist at a major 

university, who responded that “according to our hospital policy 

and distributor contract, I can only procure from what is 

defined as own use for hospital business.” Fera was finally 

able to acquire small amounts of Daraprim by using a physician’s 

prescription at a pharmacy. That Daraprim would not meet FDA 

31 Drug compounding is a practice whereby a pharmacist combines, 

mixes, or alters pharmaceutical ingredients to create a 

medication in a non-FDA-approved facility. Compounded drugs are 

not reviewed by the FDA for safety or efficacy. 

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requirements for BE testing, however, because the sample 

contained too few tablets, was provided in an unsealed vial, and 

had no manufacturing lot number. 

Fera also attempted to procure Daraprim through its 

contract research organization (“CRO”), Xcelience. Fera had 

entered into an agreement with Xcelience on December 22, 2016, 

to develop a generic prototype and manufacture the end product. 

Xcelience quickly ran into the same roadblocks Fera had met in 

its own efforts to acquire RLD. On January 4, 2017, Xcelience 

relayed to Fera that “the manufacturer is now limiting 

distribution of Daraprim only to hospitals and government 

agencies directly.” When Xcelience reached out to Vyera, Vyera 

explained that Fera would have to enter into an agreement 

accepting full liability from any use of Daraprim. This is the 

first time a purchase of RLD had been conditioned on Fera 

executing an indemnification clause. Fera replied by striking 

the proposed indemnity clause, which ended negotiations. 

McDougal continued to inquire of PBI in February and again 

in May of 2017, to no avail. In July 2017, Fera ended its 

relationship with Xcelience at least in part because it had 

failed to procure the RLD. 

Fera signed a development contract with another CRO in 

November 2017. Fera also negotiated a partnership with a 

contract manufacturing organization (“CMO”). That CMO completed 

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its first manufacture of Fera’s generic pyrimethamine product in 

March 2019. 

Meanwhile, in January 2018, Fera succeeded in purchasing 

two 100-count bottles of Daraprim from Reliant at a cost of 

$115,000 per bottle. Fera declined to purchase more bottles at 

that time, partly because the bottles came from a manufacturing 

lot that expired in Summer 2019, that is, before Fera was sure 

that it could conduct BE testing. Fera intended to purchase 

additional bottles from Reliant as its development timeline 

became clearer. In April 2018, Reliant informed Fera that 

Vyera’s Mulleady had repurchased its inventory of Daraprim and 

that it could not acquire more. 

Using an industry broker, Vyera’s Mulleady asked to meet 

with Fera in April of 2018. DellaFera met with Mulleady in 

April and May of 2018. Following instructions from Shkreli, 

Mulleady quizzed DellaFera about his plans, dangling the 

possibility of a joint venture as he did. Mulleady told 

DellaFera that he had repurchased Reliant’s entire stock of 

Daraprim. He also related that he had flown to India to lock 

RL Fine into an exclusive contract in order to prevent it from 

supplying two major pharmaceutical companies, Mylan and Sandoz, 

with pyrimethamine. He explained that Vyera was paying RL Fine 

a royalty on Daraprim sales. When Mulleady added that he knew 

the identity of Fera’s API supplier, DellaFera understood this 

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as a threat that Vyera was willing to interfere with Fera’s 

source of API as well. At this point, DellaFera became 

concerned that Fera might never get pyrimethamine into the 

market. DellaFera had no interest in a joint venture with Vyera 

and the discussions came to a close. 

Like Cerovene, Fera had already asked the FDA for a waiver 

of its BE testing requirements due to difficulty acquiring RLD. 

In October 2017, Fera proposed performing a pharmacokinetic 

study, which would not require Daraprim RLD, in lieu of BE 

testing. Fera explained that 

the unavailability due to the restricted access 

program created by the RLD has made the development of 

a generic version of the product largely impossible. 

Additionally, the cost of the RLD is exorbitant, 

forcing even patients to forego this medically 

necessary treatment. 

The FDA denied Fera’s request. 

On June 1, 2018, Fera requested a competitive generic 

therapy designation from the FDA that would allow for expedited 

review of Fera’s application. It also asked for a meeting with 

the relevant FDA officials to ensure that its ANDA was on track. 

In August 2018, Fera sought a waiver “for the minimum number of 

RLD samples required to be retained from the conduct of the Fed 

and Fasting BE studies.” Fera pointed out that 

[t]he RLD sponsor for this drug product, Vyera, 

utilizes a closed pharmacy distribution model. This 

has resulted in extreme difficulty in obtaining 

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sufficient samples of drug product normally needed to 

meet all ANDA test analysis and BE study requirements. 

In January 2019, the FDA again denied Fera’s request. 

On March 4, 2019, Fera’s team participated in a call with 

the FDA’s Office of Generic Drugs. DellaFera stressed how 

difficult it was to locate RLD and that it had taken over a year 

to buy just two bottles. He described his conversations with 

Mulleady, including Mulleady’s admission that Vyera had entered 

an exclusive API supply agreement with RL Fine to eliminate 

competition from Mylan and Sandoz. In April, Fera formally 

requested another waiver to conduct BE testing with only two 

bottles of Daraprim, which the FDA granted in June. 

Fera immediately conducted BE testing of its generic 

pyrimethamine product, undertook six months of stability 

testing, and filed its ANDA in December 2019. The FDA responded 

by requiring Fera to conduct additional tests on its API, and in 

August 2020, the FDA sent Fera a complete response letter citing 

deficiencies in the impurity profile of Fera’s API. Due to the 

COVID-19 pandemic, it took Fera until December 2020 to complete 

the resubmission. On July 27, 2021, the FDA approved Fera’s 

generic pyrimethamine ANDA. 

Vyera delayed Fera’s entry into the generic pyrimethamine 

market by roughly twenty-four months. This timeline assumes 

that Fukuzyu would have agreed to supply Fera with pyrimethamine 

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after Fera reached out to it for a second time in September 2017 

and that Fera had unimpeded access to Daraprim RLD. DellaFera 

estimates that, operating on those assumptions, Fera’s generic 

Daraprim would have entered the market twenty-three months 

later, or in August 2019 instead of shortly after Fera’s ANDA 

was approved in July of 2021. 

As DellaFera explained at trial, Fera would have acted 

promptly to finalize an agreement with a CMO partner to 

manufacture the drug. The CMO would have taken between three or 

four months -- or up to April 2018 at the latest -- to 

manufacture the necessary batches of generic pyrimethamine for 

six months of stability testing, bringing the timeline to 

October 2018. During this six-month period, Fera would have 

conducted BE testing, assembled its ANDA, and been prepared to 

file its ANDA by November 2018. Presuming eight months for 

review, the FDA would have approved Fera’s ANDA in July 2019, 

avoiding any delays caused by the COVID-19 pandemic. As Fera’s 

CMO would have been producing batches of generic pyrimethamine 

for commercial sales while awaiting FDA approval, Fera would 

have been ready to launch its product within a month, or by 

August 2019.32 

32 At trial, Shkreli did not take issue with this timeline. 

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D. InvaTech 

InvaTech has also filed an ANDA for generic pyrimethamine. 

Identifying RL Fine as its supplier of API, InvaTech filed an 

ANDA on July 28, 2017. Due to its exclusive supply agreement 

with Vyera, however, RL Fine stopped cooperating with InvaTech 

and InvaTech was forced to find a new supplier of API. Although 

Vyera’s actions have delayed InvaTech’s entry into the market, 

there are too many unknowns to attribute any particular period 

of delay to Vyera. InvaTech has still not received FDA approval 

for its ANDA. 

InvaTech, founded in 2009, is a New Jersey pharmaceutical 

company that develops and markets around twenty products. In 

2014, it began its effort to develop generic pyrimethamine. In 

October of 2014, InvaTech bought six 100-tablet bottles of 

Daraprim for a total of just over $8,000. 

Like Cerovene, InvaTech initially chose Ipca as its API 

supplier, but was forced to look elsewhere following the FDA’s 

2015 Ipca import ban. In the summer of 2015, RL Fine agreed to 

supply pyrimethamine to InvaTech. In February 2017, InvaTech 

and RL Fine executed a Preliminary Collaboration Agreement 

covering pyrimethamine and two other products for which RL Fine 

would supply the API. RL Fine agreed to file a DMF for 

pyrimethamine. While the Agreement left RL Fine free to supply 

pyrimethamine to other companies, InvaTech was given 

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preferential pricing. The Agreement specified that InvaTech 

would file its pyrimethamine ANDA in either 2017 or 2018. 

InvaTech used RL Fine’s API to conduct BE testing. Because 

RL Fine had not yet filed a DMF, InvaTech requested in June 2017 

that RL Fine provide it with the documentation regarding its 

pyrimethamine manufacturing process for InvaTech to include in 

its ANDA. With that information, on July 28, 2017, InvaTech 

filed its pyrimethamine ANDA. 

On September 11, 2017, the FDA sent a response that 

included questions about RL Fine’s API, setting an answer 

deadline of September 18. InvaTech sought assistance from RL 

Fine, but RL Fine ignored each of its requests. By that time, 

Vyera and RL Fine were in the midst of negotiating their 

exclusive supply agreement. 

Given the urgency of the situation, Patel flew to India in 

September for a two-hour meeting with RL Fine. In that meeting 

and through other communications, Patel learned that RL Fine 

would no longer support InvaTech’s pyrimethamine ANDA even 

though it continued to support InvaTech’s work on the other two 

products. 

On May 22, 2018, the FDA issued a complete response letter 

to InvaTech’s ANDA. The FDA cited major deficiencies, including 

deficiencies with the API information. RL Fine again ignored 

InvaTech’s requests for help. 

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Having lost first Ipca and then RL Fine as its API 

supplier, InvaTech turned to a third company. On July 31, 2019, 

InvaTech amended its ANDA to reflect the transfer of its API 

source to that third company. To this day, InvaTech continues 

to work toward approval of a generic Daraprim product. 

E. Mylan 

Vyera was successful in preventing one of the largest 

manufacturers of generic drugs in the United States from 

entering the market. Prompted by the dramatic increase in 

Daraprim’s price, Mylan explored developing generic 

pyrimethamine. In February 2016, Mylan began to search for 

potential pyrimethamine API suppliers. By December 2016 Mylan 

concluded that RL Fine was the only supplier that could provide 

pyrimethamine “off the shelf and not require a development 

agreement.” By that time, however, RL Fine had entered the 

exclusive supply agreement with Cerovene. 

Like Cerovene and Fera, Mylan was also unable to acquire 

Daraprim RLD through its regular distributors and approved 

vendors. It could not get “even a single bottle.” Mylan’s Head 

of Global Project Management can only recall two or three other 

times out of hundreds of projects in which Mylan had such 

trouble. In those instances, the difficulties were easily 

explained by the fact that the RLD was part of a REMS program. 

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Unable to find a source of the API or to obtain Daraprim, Mylan 

abandoned its nascent plans to develop generic pyrimethamine. 

VII. Impact of Competition on Prices of Daraprim 

In early 2020, Vyera braced for the imminent approval of 

Cerovene’s ANDA and subsequent launch of Dr. Reddy’s FDAapproved generic pyrimethamine product. In an internal forecast 

prepared in March 2020, Vyera projected that the net price for a 

Daraprim tablet would immediately drop from $278 to $126 after 

generic entry, based on the assumption that Dr. Reddy’s generic 

would launch at a 61% discount on April 1, 2020. Assuming that 

another generic competitor would enter the market on September 

1, Vyera projected that the business lost by the end of the year 

due to generic competition would increase to $2.1 million per 

month and amount to close to $13 million for the year 2020. 

Dr. Reddy’s FDA-approved generic pyrimethamine launched 

with a WAC of $292.50. Daraprim immediately faced stiff price 

competition, and the net price of FDA-approved pyrimethamine 

products dropped substantially. During its first nine months on 

the market, the average net price of Dr. Reddy’s generic 

pyrimethamine was $197 per tablet, a significant discount from 

$228, which was the average net price of Daraprim in the prior 

year. By the end of 2020, Dr. Reddy’s generic pyrimethamine had 

captured 41% of the sales volume for all FDA-approved 

pyrimethamine. At the same time as the price of FDA-approved 

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pyrimethamine dropped, the total volume of FDA-approved 

pyrimethamine sales increased. The sales volume expanded by 9% 

when 2020 sales are compared to 2019 sales. This expansion 

recovered some of the sales lost when Vyera hiked Daraprim’s 

price by 4,000% in 2015. 

In March 2020, Vyera launched its own generic pyrimethamine 

tablet (the “Vyera AG”).33 The Vyera AG had captured only 16% of 

the FDA-approved pyrimethamine market by the end of 2020. 

The chart below illustrates the relative market share of 

Daraprim, the Vyera AG (identified as “Authorized Generic”), and 

33 A generic of a brand name drug may be launched under the 

brand’s preexisting FDA approval. It is known as an authorized 

generic. 

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Dr. Reddy’s generic pyrimethamine (identified as “DRL”) between 

the first quarter of 2019 and the last quarter of 2020. 

The next chart illustrates the change in the average net 

price of all FDA-approved pyrimethamine, which dropped from $228 

in 2019 to $166 in 2020 -- a decrease of 27%. This rate of 

decrease exceeded any year-over-year net price drop that had 

occurred since 2016. 

In response to the entry of Dr. Reddy’s generic 

pyrimethamine, Vyera cut the net price of Daraprim through steep 

rebates and brand-for-generic offers to pharmacies and pharmacy 

benefit managers. Despite these offers from Vyera, the 

availability of generic alternatives to Daraprim allowed 

pharmacy benefit managers to cover the cheaper generic 

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competitors at the lowest tiers of their formularies and to 

exclude Daraprim from their formularies. For example, in 

January 2021 CVS Caremark moved Daraprim to “excluded status” on 

its standard control formulary. It explained its decision as 

follows: CVS Caremark, like most payors, promotes a “genericfirst strategy.” Where the branded drug is expensive and two 

generics became available, it is “a very cost-effective 

strategy” to exclude the brand from the formulary. With the 

entry of more generic competitors in the FDA-approved 

pyrimethamine market, the price of FDA-approved pyrimethamine 

can be expected to fall further. 

VIII. The Role of Martin Shkreli at Vyera 

Shkreli founded Vyera. He did so with the intention to use 

Vyera to acquire a pharmaceutical that was the sole source of 

treatment for a life-threatening ailment, raise the drug’s price 

sky-high, and keep it sky-high for as long as possible by 

blocking generic competition. 

Shkreli was Vyera’s first CEO, a position he held from 

October 10, 2014 to December 18, 2015. It was Shkreli who made 

the decision to acquire Daraprim and to implement his scheme 

with Daraprim. He directed his team to identify a small, 

essential drug out of patent protection and without generic 

competition that could be priced exorbitantly. That drug was 

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Daraprim. Shkreli signed off on Vyera’s unsolicited bid to 

acquire it at a price far above its present value. 

Shkreli raised the price of Daraprim to $750 per tablet. 

When Vyera’s General Counsel objected to the price hike, Shkreli 

fired him. 

To block generic competition, Shkreli devised a highly 

restrictive, closed distribution system for Daraprim and told 

Vyera that it was a top priority to put it in place by the time 

of the price hike. Shkreli also instructed his staff to buy 

back Daraprim inventory from wholesalers and distributors. 

Having checked the FDA’s pyrimethamine DMF list, Shkreli 

decided to pursue an exclusive supply contract with Fukuzyu. As 

Tilles, Shkreli’s immediate successor as CEO, explained, the 

2017 Fukuzyu contract was “something [Shkreli] wanted and it 

happened.” As the arrival of a generic competitor grew more 

likely, in 2017 Shkreli decided to pursue an exclusive supply 

contract with pyrimethamine manufacturer RL Fine as well. 

Shkreli remained in functional control of Vyera’s 

management and its business strategy even after his arrest in 

December 2015 and in spite of management’s occasional 

resistance. He was Vyera’s largest shareholder and at any one 

time controlled between 43.07% and 49.44% of its voting shares. 

Even during his incarceration, Shkreli worked to ensure that his 

grand strategy not only remained in place but actually worked. 

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Critically, none of the resistance put up by Shkreli’s 

successors included unwinding Vyera’s anticompetitive strategy. 

To the contrary, all of Vyera’s CEOs pursued Shkreli’s original 

vision. 

Shkreli recruited employees and agents to carry out his 

vision at Vyera and picked the men who ran Vyera after he 

stepped down as its CEO. That those agents’ names appear on 

documents executed after Shkreli’s formal departure in lieu of 

his own does not shield him as the scheme’s prime mover from 

individual liability. Shkreli initiated every anticompetitive 

decision that Vyera pursued to its conclusion. He maintained 

“shadow control” of the company, staying in close contact with 

Vyera’s directors and officers, providing guidance on how to 

maintain control of the market, and threatening to use his 

authority as the largest shareholder to call an extraordinary 

general meeting (“EGM”) that would install more pliant officers 

and directors. He did exactly that in 2017 and again in 2020, 

each time installing loyalists. 

As Tilles has testified, he couldn’t do anything “major” as 

CEO of Vyera without Shkreli’s approval. When Shkreli became 

frustrated with Tilles, he replaced him with Dr. Salinas. 

Shkreli quickly became dissatisfied with Dr. Salinas too, 

proclaiming in one email that Dr. Salinas was a “cockroach that 

needed to be stomped or crushed.” 

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Utilizing his controlling voting shares, Shkreli replaced 

Dr. Salinas with Mulleady. In June of 2017, Shkreli called an 

EGM of the shareholders to vote on a new slate of Directors. 

The Phoenixus Board and Shkreli put up competing slates. 

In its Invitation to shareholders, the Board strongly 

opposed Shkreli’s slate as unqualified and conflicted. The 

Board advised that 

many third parties -- including regulatory authorities 

-- will likely deem the newly elected Board members to 

be serving merely as straw men acting on Mr. Shkreli's 

behalf, and could further deem Mr. Shkreli to be in a 

position to influence, direct or control the Board and 

thus, the Company as well. 

At the EGM held on June 21, 2017, Shkreli’s slate was elected. 

The new Board members notably lacked experience in the 

pharmaceutical industry. Those new members included Mulleady 

and Mithani. Tilles had fired Mulleady after Shkreli’s arrest 

because Mulleady lacked “any skills” to offer the company. 

Mithani had graduated from college just three years earlier. 

His only prior employment was at a distressed debt brokerage 

firm, which he had quit to manage his own investment portfolio. 

Mithani has admitted that he was not qualified to join the board 

of a pharmaceutical company and that he was placed on the Board 

because Shkreli wanted “people he can trust.” 

The next day, the Board placed Dr. Salinas, then interim 

CEO, on leave and established an Executive Committee to “perform 

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executive functions and take over the task of the Senior 

Management (CEO, CFO, CCO and CLO).” The Executive Committee 

had only two members: Mulleady and Mithani. 

Mulleady promptly sent a reassuring email to Vyera’s sales 

force, which was confronting an FDA announcement that it would 

expedite review of pyrimethamine ANDAs. He explained, 

In my opinion, this not an immediate concern. Getting 

to the point of filing an ANDA is a cumbersome 

process. Personally, I can tell you the FDA approval 

is generally not the main barrier to entry for 

generics in our class. Amongst other necessities, a 

company would have to successfully create the active 

ingredient on scale using a well-controlled process 

and then formulate. Next they would have to obtain 

RLD (registered listed drug), 10 labelled and 

unexpired bottles (informed estimation), of Daraprim 

to complete a study in healthy volunteers to 

demonstrate bioequivalence. 

Getting to the front of the line is helpful, but 

getting to the line is not an easy task. I can't 

imagine ANDA submission preparation taking less than 

18 months (extremely conservative). Since [Vyera] 

actively collects competitive intelligence concerning 

other potential developers, we would most likely be 

aware of this process going on and have plenty of time 

to prepare. 

Mulleady also ordered a “full out audit” of Daraprim to 

know where “every bottle” of Daraprim went. He made sure that 

Shkreli got the audit results. 

If anything, Shkreli tightened his control over Vyera as 

his criminal problems progressed. Concern was expressed at an 

August 30, 2017 Board meeting that the company was buying back 

shares at a price below par value “to increase Martin Shkreli’s 

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holding in the Company and to facilitate his control over it.” 

At Mulleady and Mithani’s urging, the Board nonetheless approved 

the buyback. The Board then appointed Mulleady CEO in October 

2017.34 

Shkreli kept in regular contact with both Mulleady and 

Mithani to discuss when a generic Daraprim drug might enter the 

market and what should be done to slow that entry. As shown in 

an Excel spreadsheet maintained by Mulleady, between December 

26, 2019 and July 14, 2020 alone, at a time when Shkreli was in 

prison, Mulleady and Shkreli communicated over 1,500 times. 

In the few recordings of Shkreli’s conversations from 

prison with Vyera management that are part of the trial record, 

Shkreli openly discussed his control over Vyera. He observed 

that he had “EGM power.” Shkreli said “I have no problem firing 

everybody to be frank, if you guys can’t figure it out.” In 

September 2020, Shkreli told Mulleady that any dissenters 

amongst the Directors needed to understand that “being on the 

board of Phoenixus means, you know, you’re on the Martin and 

Kevin board.” Shkreli compared himself to Mark Zuckerberg and 

34 Mulleady served as the interim Executive Director of Vyera and 

Phoenixus from October to December 2017, then became Vyera’s CEO 

from January 1, 2018 until February 19, 2019. Mulleady was 

removed as the Chairman of the Board of Phoenixus on November 

17, 2020 and removed from the Board on December 11 at another 

EGM called by Shkreli. 

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Vyera to Facebook, noting that Zuckerberg “just happens to own 

the thing and that’s the way it is,” and “[y]ou can’t go in 

there and tell Zuckerberg what to do.” 

In February 2020, Shkreli used his EGM power to change 

Vyera’s management team once again. This time, he removed 

Mulleady. Mulleady had added a “confidential” item to the 

agenda of an upcoming Board meeting. It was intended to address 

Shkreli’s meddlesome involvement with Vyera. But before it 

could be discussed, Shkreli called for an EGM, Mulleady was 

removed from the Board, and Shkreli’s new directors were 

installed. 

Discussion 

The FTC has brought claims against Shkreli for violations 

of §§ 1 and 2 of the Sherman Act. The States have brought 

claims against Shkreli based on violations of various state 

statutes and Pennsylvania common law, all of which follow 

federal precedent. After finding that the Plaintiffs have 

carried their burden of proving by a preponderance of the 

evidence that Shkreli violated §§ 1 and 2 of the Sherman Act and 

the state laws at issue here, the Plaintiffs’ requests for 

relief will be addressed. 

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I. Legal Standard 

A. Section 5 of the FTC Act 

The FTC brings this action pursuant to authority given to 

it in the FTC Act. The FTC Act declares “[u]nfair methods of 

competition” to be unlawful, 15 U.S.C. § 45, and directs the FTC 

to prevent violations of the FTC Act. “Unfair methods of 

competition” under the FTC Act encompass violations of the 

Sherman Act. FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 454-

55, 465-66 (1986). 

B. Section 1 of the Sherman Act 

Section 1 of the Sherman Act outlaws “[e]very contract, 

combination . . . , or conspiracy, in restraint of trade or 

commerce among the several States.” 15 U.S.C. § 1. The 

“primary purpose of the antitrust laws is to protect interbrand 

competition. Low prices . . . benefit consumers.” State Oil

Co. v. Khan, 522 U.S. 3, 15 (1997). 

To prove a § 1 violation, a plaintiff must show that there 

was “a combination or some form of concerted action between at 

least two legally distinct economic entities that constituted an 

unreasonable restraint of trade.” United States v. Apple, Inc., 

791 F.3d 290, 313 (2d Cir. 2015) (citation omitted). 

“[O]fficers or employees of the same firm do not provide the 

plurality of actors imperative for a § 1 conspiracy” because “an 

internal agreement to implement a single, unitary firm's 

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policies does not raise the antitrust dangers that § 1 was 

designed to police.” Copperweld Corp. v. Indep. Tube Corp., 467 

U.S. 752, 769 (1984). 

“The first crucial question in a Section 1 case is . . . 

whether the challenged conduct stems from independent decision 

or from an agreement, tacit or express.” Apple, 791 F.3d at 

314–15 (citation omitted). Courts presumptively apply a rule of 

reason analysis to challenged agreements to determine whether 

they restrain trade. 1-800 Contacts, Inc. v. Fed. Trade Comm'n, 

1 F.4th 102, 114 (2d Cir. 2021) (citing Texaco Inc. v. Dagher, 

547 U.S. 1, 5 (2006)). Therefore, “antitrust plaintiffs must 

demonstrate that a particular contract or combination is in fact 

unreasonable and anticompetitive before it will be found 

unlawful.” Texaco, 547 U.S. at 5. Anticompetitive effects may 

be shown through direct evidence of increased prices in the 

relevant market. 1-800 Contacts, 1 F.4th at 118. 

Under the rule of reason, 

[a] plaintiff bears the initial burden of showing that 

the challenged action has had an actual adverse effect 

on competition as a whole in the relevant market. 

After a prima facie case of anticompetitive conduct 

has been established, the burden shifts to the 

defendant to proffer procompetitive justifications for 

the agreement. Assuming defendants can provide such 

proof, the burden shifts back to the plaintiffs to 

prove that any legitimate competitive benefits offered 

by defendants could have been achieved through less 

restrictive means. 

Id. at 114 (citation omitted). 

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The rule of reason analysis requires a court to weigh “the 

relevant circumstances of a case to decide whether a restrictive 

practice constitutes an unreasonable restraint on competition.” 

Anderson News, L.L.C. v. Am, Media, Inc., 680 F.3d 162, 183 (2d 

Cir. 2012) (quoting Monsanto Co. v. Spray–Rite Service Corp., 

465 U.S. 752, 761 (1984)). Such factors may include “specific 

information about the relevant business, its condition before 

and after the restraint was imposed, and the restraint’s 

history, nature, and effect.” State Oil Co., 522 U.S. at 10. 

Exclusive dealing arrangements “implicate § 1 because they 

have the potential unreasonably to exclude competitors or new 

entrants from a needed supply, or to allow one supplier to 

deprive other suppliers of a market for their goods.” Geneva

Pharms. Tech. Corp. v. Barr Lab'ys Inc., 386 F.3d 485, 508 (2d 

Cir. 2004). Exclusive dealing is a § 1 violation “only when the 

agreement freezes out a significant fraction of buyers or 

sellers from the market.” Id. 

Exclusive dealing agreements may “have pro-competitive 

purposes and effects, such as assuring steady supply, affording 

protection against price fluctuations, reducing selling 

expenses, and promoting stable, long-term business 

relationships.” Id. In analyzing the procompetitive effects of 

these agreements, “courts must take care to consider the 

competitive characteristics of the relevant market.” Id. 

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C. Section 2 of the Sherman Act 

Under § 2 of the Sherman Act, it is unlawful to 

“monopolize, or attempt to monopolize . . . any part of the 

trade or commerce among the several States.” 15 U.S.C. § 2. A 

claim brought under § 2 of the Sherman Act has two elements: 

“(1) the possession of monopoly power in the relevant market and 

(2) the willful acquisition or maintenance of that power as 

distinguished from growth or development as a consequence of a 

superior product, business acumen, or historic accident.” 

United Food & Com. Workers Loc. 1776 & Participating Emps. 

Health & Welfare Fund v. Takeda Pharm. Co. Ltd., 11 F.4th 118, 

137 (2d Cir. 2021) (quoting United States v. Grinnell Corp., 384 

U.S. 563, 570–71 (1966)). “To safeguard the incentive to 

innovate, the possession of monopoly power will not be found 

unlawful unless it is accompanied by an element of 

anticompetitive conduct.” In re Adderall XR Antitrust Litig., 

754 F.3d 128, 133 (2d Cir. 2014) (quoting Verizon Commc'ns Inc. 

v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 

(2004)). 

Monopoly Power 

Monopoly power is “the power to control prices or exclude 

competition.” Geneva Pharms., 386 F.3d at 500 (quoting United

States v. E. I. du Pont de Nemours & Co., 366 U.S. 316, 334 

(1961)). Defendants with monopoly power have “the ability (1) 

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to price substantially above the competitive level and (2) to 

persist in doing so for a significant period without erosion by 

new entry or expansion.” AD/SAT, Div. of Skylight, Inc. v.

Associated Press, 181 F.3d 216, 227 (2d Cir. 1999). A plaintiff 

can establish a defendant’s monopoly power either “directly 

through evidence of control over prices or the exclusion of 

competition, or it may be inferred from a firm’s large 

percentage share of the relevant market.” Geneva Pharms., 386 

F.3d at 500. 

“While market share is not the functional equivalent of 

monopoly power, it nevertheless is highly relevant to the 

determination of monopoly power.” Tops Markets, Inc. v. Quality

Markets, Inc., 142 F.3d 90, 98 (2d Cir. 1998). As such, 

“defining a relevant market is generally a necessary component 

of analyzing a monopolization claim.” PepsiCo, Inc. v. CocaCola Co., 315 F.3d 101, 108 (2d Cir. 2002). “Once a relevant 

market is determined, the defendant's share in that market can 

be used as a proxy for market power.” Id. 

“The relevant market must be a market for particular 

products or services, the outer boundaries of which are 

determined by the reasonable interchangeability of use or the 

cross-elasticity of demand between the product itself and 

substitutes for it.” US Airways, Inc. v. Sabre Holdings Corp., 

938 F.3d 43, 64 (2d Cir. 2019) (quoting Brown Shoe Co. v. United 

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States, 370 U.S. 294, 325 (1962)). “[A] single brand of a 

product or service may be a relevant market under the Sherman 

Act if no substitute exists for that brand's products or 

services.” US Airways, 938 F.3d at 66 (citation omitted). On 

the other hand, products “need not be identical” to exist in the 

same market. AD/SAT, 181 F.3d at 227. Pharmaceutical drugs 

that are “therapeutically equivalent” can nevertheless exist in 

separate markets. Geneva Pharms., 386 F.3d at 496. To define 

the boundaries of the relevant market, courts can look toward 

such practical indicia as industry or public 

recognition of the submarket as a separate economic 

entity, the product's peculiar characteristics and 

uses, unique production facilities, distinct 

customers, distinct prices, sensitivity to price 

changes, and specialized vendors. 

US Airways, 938 F.3d at 64 (quoting Brown Shoe, 370 U.S. at 

325). 

Courts will find sufficient cross-elasticity of demand if 

“consumers would respond to a slight increase in the price of 

one product by switching to another product.” Geneva Pharms., 

386 F.3d at 496. One of the tests that courts employ to discern 

the relevant market is the hypothetical monopolist test (“HMT”). 

Under that test, courts ask “[w]hether a hypothetical monopolist 

acting within the proposed market would be substantially 

constrained from increasing prices by the ability of customers 

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to switch to other products.” United States v. Am. Express Co., 

838 F.3d 179, 198-199 (2d Cir. 2016) (citation omitted). 

The Court implements the HMT by imagining that a 

hypothetical monopolist has imposed a small but 

significant non-transitory increase in price (“SSNIP”) 

within the proposed market. If the hypothetical 

monopolist can impose this SSNIP without losing so 

many sales to other products as to render the SSNIP 

unprofitable, then the proposed market is the relevant 

market. By contrast, if consumers are able and 

inclined to switch away from the products in the 

proposed market in sufficiently high numbers to render 

the SSNIP unprofitable, then the proposed market 

definition is likely too narrow and should be 

expanded. 

Id. at 199. 

The Department of Justice and the FTC most often use a 

SSNIP of five percent. U.S. Dep’t of Justice & Fed. Trade 

Comm’n, Horizontal Merger Guidelines § 4.1.2 (2010). Once the 

relevant market is established, courts have found that “a market 

share of over 70 percent is usually strong evidence of monopoly 

power.” Tops Markets, 142 F.3d at 99. 

Anticompetitive Conduct 

The second element of the monopolization claim “requires a 

plaintiff to establish that the defendant has engaged in 

improper conduct that has or is likely to have the effect of 

controlling prices or excluding competition.” Takeda, 11 F.4th 

at 137 (citation omitted). “For there to be an antitrust 

violation, generics need not be barred from all means of 

distribution if they are barred from the cost-efficient ones.” 

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New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638, 656 

(2d Cir. 2015) (“Actavis PLC”) (citation omitted). 

“[O]nce a plaintiff establishes that a monopolist's conduct 

is anticompetitive or exclusionary, the monopolist may proffer 

nonpretextual procompetitive justifications for its conduct. 

The plaintiff may then either rebut those justifications or 

demonstrate that the anticompetitive harm outweighs the 

procompetitive benefit.” Actavis PLC, 787 F.3d at 652 (citation 

omitted). 

II. Plaintiff States’ Laws 

Seven States have joined in this action. They are the 

States of New York, California, Ohio, Illinois, and North 

Carolina, and the Commonwealths of Pennsylvania and Virginia. 

A. New York 

The New York Donnelly Act, New York’s antitrust statute, 

declares illegal 

Every contract, agreement, arrangement or combination 

whereby . . . [c]ompetition or the free exercise of 

any activity in the conduct of any business, trade or 

commerce or in the furnishing of any service in this 

state is or may be restrained or whereby . . . for the 

purpose of establishing or maintaining any such 

monopoly or unlawfully interfering with the free 

exercise of any activity in the conduct of any 

business, trade or commerce or in the furnishing of 

any service in this state any business, trade or 

commerce or the furnishing of any service is or may be 

restrained. 

N.Y. Gen. Bus. Law § 340(1). The New York Donnelly Act is 

“modeled after the Sherman Act and should generally be construed 

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in light of Federal precedent.” Biocad JSC v. F. Hoffmann-La

Roche, 942 F.3d 88, 101 (2d Cir. 2019) (citation omitted). 

Section 63(12) of the New York Executive Law authorizes the 

New York Attorney General to seek equitable relief. In relevant 

part, § 63 provides: 

Whenever any person shall engage in repeated 

fraudulent or illegal acts or otherwise demonstrate 

persistent fraud or illegality in the carrying on, 

conducting or transaction of business, the attorney 

general may apply . . . for an order enjoining the 

continuance of such business activity or of any 

fraudulent or illegal acts, [and] directing 

restitution and damages . . . . The term “persistent 

fraud” or “illegality” as used herein shall include 

continuance or carrying on of any fraudulent or 

illegal act or conduct. The term “repeated” as used 

herein shall include repetition of any separate and 

distinct fraudulent or illegal act, or conduct which 

affects more than one person. 

N.Y. Exec. Law § 63(12). 

“Any conduct which violates state or federal law or 

regulation is actionable” under Executive Law § 63(12). People

ex rel. Vacco v. World Interactive Gaming Corp., 714 N.Y.S.2d 

844, 848 (N.Y. Sup. Ct. 1999). When a defendant engages in 

conduct within New York prohibited by Executive Law § 63(12), 

the Attorney General is authorized to seek relief on behalf of 

out-of-state residents injured by the wrongdoing. People ex

rel. Cuomo v. H & R Block, Inc., 870 N.Y.S.2d 315, 316 (1st 

Dep't 2009); see also Vyera, 2021 WL 4392481, at *4. 

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B. California 

The California Cartwright Act, Cal. Bus. & Prof. Code § 

16700 et seq., prohibits “conspiracies or agreements in 

restraint or monopolization of trade.” Exxon Corp. v. Superior

Ct., 60 Cal. Rptr. 2d 195, 200 (1997), as modified on denial of

reh'g (Feb. 13, 1997). The analysis of claims brought under 

California’s Cartwright Act “mirrors the analysis under federal 

law because the Cartwright Act . . . was modeled after the 

Sherman Act.” Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 

1148, 1160 (9th Cir. 2001) (citation omitted). 

The California Unfair Competition Law prohibits “any 

unlawful, unfair or fraudulent business act or practice.” Cal. 

Bus. & Prof. Code § 17200. In actions brought by the Attorney 

General, courts may “grant such mandatory injunctions as may be 

reasonably necessary to restore and preserve fair competition in 

the trade or commerce affected by the violation.” Cal. Bus. & 

Prof. Code § 16754.5. 

C. Illinois 

The Illinois Antitrust Act (“IAA”) instructs that “[w]hen 

the wording of this Act is identical or similar to that of a 

federal antitrust law, the courts of this State shall use the 

construction of the federal law by the federal courts as a guide 

in construing this Act.” 740 Ill. Comp. Stat. 10/11. “Illinois 

courts interpret the state antitrust law in harmony with federal 

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case law construing analogous provisions of federal 

legislation.” McGarry & McGarry, LLC v. Bankr. Mgmt. Sols.,

Inc., 937 F.3d 1056, 1062 (7th Cir. 2019) (citation omitted). 

Section 10/7(1) of the IAA authorizes the Illinois Attorney 

General to bring actions to prevent and restrain violations of 

§ 3 of the IAA, and courts are directed to enter such judgment 

as they consider necessary to remove the effects of any such 

violations. 740 Ill. Comp. Stat. 10/7(1). 

D. North Carolina 

Under the North Carolina Unfair or Deceptive Practices 

Act, N.C. Gen. Stat. § 75-1, “[e]very contract, combination in 

the form of trust or otherwise, or conspiracy in restraint of 

trade or commerce in the State of North Carolina is hereby 

declared to be illegal.” N.C. Gen. Stat. § 75-1. The Attorney 

General is authorized to investigate “all corporations or 

persons doing business in this State . . . with the purpose of 

acquiring such information as may be necessary to enable him to 

prosecute any such corporation, its agents, officers and 

employees for crime, or prosecute civil actions against them if 

he discovers they are liable and should be prosecuted.” N.C. 

Gen. Stat. § 75-9. 

E. Ohio 

The Ohio Valentine Act, Ohio Rev. Code Ann. § 133, is 

“patterned after the Sherman Antitrust Act, and as a consequence 

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[Ohio’s highest] court has interpreted the statutory language in 

light of federal judicial construction of the Sherman Act.” 

C. K. & J. K, Inc. v. Fairview Shopping Ctr. Corp., 407 N.E.2d 

507, 509 (Ohio 1980). “Ohio has long followed federal law in 

interpreting the Valentine Act.” Johnson v. Microsoft Corp.,

834 N.E.2d 791, 794–95 (Ohio 2005). The Ohio Attorney General 

has a duty to “do all things necessary” to enforce the antitrust 

laws, by bringing suits for “equitable relief.” O.R.C. § 

109.81. 

F. Pennsylvania 

To establish a claim under Pennsylvania’s common law 

doctrine against unreasonable restraint of trade, the plaintiff 

may show that “the illegal bargain tends to create or has for 

its purpose to create a monopoly in prices or products,” or that 

“competition has in fact been restricted by the monopolistic 

agreement.” Collins v. Main Line Board of Realtors, 304 A.2d 

493, 496-97 (Pa. 1973). The Pennsylvania Supreme Court has 

applied federal courts’ interpretation of the Sherman Act to 

state common law antitrust claims. See id. 

G. Virginia 

Virginia Code § 59.1-9.5 parallels § 1 of the Sherman Act 

and provides that “[e]very contract, combination or conspiracy 

in restraint of trade or commerce of this Commonwealth is 

unlawful.” Section § 59.1-9.6 parallels § 2 of the Sherman Act 

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and provides that “[e]very conspiracy, combination, or attempt 

to monopolize, or monopolization of, trade or commerce of this 

Commonwealth is unlawful.” The Virginia Antitrust Act, Va. Code 

Ann. § 59.1 et seq, requires that the statute “shall be applied 

and construed to effectuate its general purposes in harmony with 

judicial interpretation of comparable federal statutory 

provisions.” Va. Code Ann. § 59.1-9.17. The Virginia Attorney 

General may seek “injunctive relief” for violations of the Act. 

Virginia Code § 59.1-9.15(a). 

III. Liability 

The Plaintiffs have shown that Shkreli is liable for 

Vyera’s unreasonable restraint of trade and monopolization of 

the FDA-approved pyrimethamine market in violation of §§ 1 and 2 

of the Sherman Act. His conduct also violated the competition 

laws of each of the Plaintiff States. 

Shkreli’s anticompetitive scheme was made up of two simple 

but effective sets of vertical restraints.35 Shkreli does not 

35 The Plaintiffs proved at trial that separate provisions in 

Vyera’s contracts with Distributors were intended to impede the 

entry of generic drug companies into the FDA-approved 

pyrimethamine market by depriving those companies of accurate 

information about Daraprim sales. Through these data-blocking 

provisions, Distributors agreed not to provide Daraprim sales 

data to data aggregators such as IQVIA, Symphony Health, and 

Wolters Kluwer. Because the absence of this normally available 

market data did not impede the entry of either Cerovene or Fera, 

the data-blocking scheme need not be further described. The 

Cerovene and Fera experiences are central to the calculation of 

the disgorgement the State Plaintiffs seek. 

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dispute that it was his intention to impede generic 

pharmaceutical companies from launching competitive products 

that would threaten the price of Daraprim. The Plaintiffs have 

shown that the restraints Vyera implemented succeeded in doing 

just that. 

The two restraints -- restrictive distribution contracts 

for Daraprim and exclusive supply agreements for pyrimethamine 

-- exploited features of the FDA approval process for generic 

drug products by unreasonably and unlawfully restricting the 

markets for RLD and API. These agreements violated § 1 of the 

Sherman Act. Through these agreements, Shkreli and Vyera 

unlawfully and willfully maintained a monopoly in FDA-approved 

pyrimethamine, which is the relevant market in which Shkreli and 

Vyera operated their anticompetitive scheme. Vyera maintained 

that monopoly through anticompetitive conduct and not “from 

growth or development as a consequence of a superior product, 

business acumen, or historic accident.” Takeda, 11 F.4th at 137 

(citation omitted). 

B. The Relevant Market 

The analysis under §§ 1 and 2 of the Sherman Act relies, as 

a threshold matter, on the definition of the relevant market. 

The Plaintiffs have proven that, by any established method, FDAapproved pyrimethamine is the relevant product market and the 

United States is the relevant geographic market. Shkreli does 

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not dispute that the United States is the relevant geographic 

market. 

Apart from a generic equivalent to Daraprim that receives 

FDA approval, no reasonably interchangeable substitute for 

Daraprim exists for the treatment of toxoplasmosis. This is 

true in terms of both the use of Daraprim to treat 

toxoplasmosis, particularly active toxoplasma encephalitis, as 

well as the cross-elasticity of demand for FDA-approved 

pyrimethamine for treatment of that disease. 

In terms of its use, Daraprim is the only pharmaceutical to 

receive an A-I rating in the Guidelines for the treatment of 

active toxoplasma encephalitis. It has many unique features. 

Among other qualities, FDA-approved pyrimethamine targets 

toxoplasmosis specifically, has been successfully used in its 

treatment for decades, and permits a diagnosis of toxoplasma 

encephalitis without resort to a biopsy of the brain, which 

would present significant risks to patients if performed. 

Because death and/or significant brain damage can occur within 

hours, its endorsement in the Guidelines assists physicians 

throughout the United States to treat a highly dangerous 

infection with confidence, quickly, and successfully. 

An analysis of the cross-elasticity of demand for FDAapproved pyrimethamine confirms this definition of the relevant 

market. Even in response to Vyera’s drastic price hike in 

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August 2015, appreciable numbers of physicians and their 

patients continued to use Daraprim. Vyera was profitably able 

to keep Daraprim’s list price at $750 per tablet and maintain a 

high average net price for the drug for the four years and seven 

months that it marketed Daraprim without generic competition. 

The average net price was very substantially above the 

competitive price level, whether that level is measured by 

Daraprim’s price in the years before Vyera acquired it, or in 

the period after its first generic competitor entered the 

market. As more generic competitors enter the market, of 

course, the average net price will fall even further. 

The high degree of cross-elasticity in demand between 

Daraprim and FDA-approved generic pyrimethamine is demonstrated 

as well by the market reaction to Dr. Reddy’s March 2020 launch 

of its first-to-market generic. In the period following that 

launch, both the price and sales of Daraprim (as well as Vyera’s 

revenue and profits) promptly declined as Dr. Reddy’s generic 

tablet was substituted for Daraprim. Daraprim sales dropped 49% 

in the nine-month period after March 2020 compared to the same 

period prior to entry, and Vyera’s revenue and gross profits 

from Daraprim sales declined 59% between 2019 and 2020. 

Finally, practical indicia of the relevant market support a 

finding that it is FDA-approved pyrimethamine. Shkreli and 

Vyera considered that to be the relevant market, as did Vyera’s 

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consultants and those the consultants interviewed. Generic drug 

companies also assessed the relevant market to be FDA-approved 

pyrimethamine. There is no evidence that the price hike for 

Daraprim affected the prices of any other pharmaceutical. 

Lastly, FDA-approved pyrimethamine is the only FDA-approved drug 

that specifically targets toxoplasmosis. 

In response to this cascade of evidence that FDA-approved 

pyrimethamine is the relevant product market, Shkreli argues 

that drug therapies trimethoprim-sulfamethoxazole (“TMP-SMX”) 

and compounded pyrimethamine are sufficient economic and medical 

substitutes for Daraprim and that they must be included in the 

relevant antitrust market. These therapies are not part of the 

relevant market. 

TMP-SMX is a broad-spectrum antibiotic medication approved 

by the FDA in 1973 and sold under the brand names Bactrim and 

Septra. TMP-SMX is FDA-approved to treat certain infections, 

including pneumocystis jirovecii pneumonia (“PCP”). It is also 

available as a generic. Although TMP-SMX is not FDA-approved to 

treat toxoplasmosis, a fact that Vyera itself emphasized to the 

market, it is prescribed in certain circumstances. 

TMP-SMX is an effective prophylactic treatment because it 

has been effective at preventing multiple opportunistic 

infections that tend to occur together. For example, TMP-SMX is 

the recommended medication as primary prophylaxis for PCP, and 

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patients at risk for toxoplasma encephalitis but who are not 

suffering from an acute infection of the brain are also at risk 

for PCP. These patients are often prescribed TMP-SMX 

medications to prevent both infections and reduce the “pill 

burden” for patients. For this reason, TMP-SMX is also 

effective at the secondary prophylaxis stage, in which the goal 

is to prevent a relapse in a patient that has recovered from an 

active infection. TMP-SMX, which may be administered 

intravenously, is a recommended alternative treatment when a 

patient is incapable of swallowing pills; pyrimethamine may only 

be taken orally. 

The most difficult stage in treating toxoplasmosis, 

however, is an active infection. At that point the treatment 

goal is to medicate the patient within hours of presenting 

symptoms. A pyrimethamine treatment regimen is the gold 

standard treatment in the case of an acute infection of 

toxoplasmosis. Even Vyera’s Dr. Salinas viewed TMP-SMX as 

“medically inferior” because not enough of the drug reaches the 

brain or the retina (in the case of ocular toxoplasmosis) to 

treat an infection properly. Studies have shown that TMP-SMX is 

25- to 50-times less potent than pyrimethamine. In the 

Guidelines, TMP-SMX is graded B-I for the treatment of 

toxoplasma encephalitis and recommended only “if pyrimethamine 

is unavailable or there is a delay in obtaining it.” As a 

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broad-spectrum antibiotic, TMP-SMX also cannot be reliably used 

to confirm the diagnoses of toxoplasma encephalitis, while 

pyrimethamine aids in diagnosis because it is targeted to treat 

toxoplasmosis. Finally, TMP-SMX cannot be taken by patients 

with a sulfa hypersensitivity or allergy, which constitutes 

roughly 30-35% of all HIV-positive patients.36 

The other therapy suggested by Shkreli as a potential 

substitute for Daraprim is compounded pyrimethamine, which two 

specialty pharmacies began selling in 2015. Compounding 

contains no assurance that the end product will deliver the 

correct amount of the API, and compounded products are not FDAapproved. 

Vyera itself objected to the mass production of compounded 

drugs as dangerous. On November 30, 2015, Vyera warned the FDA 

that Imprimis, a compounding pharmacy, intended to mass produce 

compounded pyrimethamine. Vyera objected that 

[c]ompounded drugs can pose serious health risks to 

patients. Compounded drugs are not FDA-approved. 

36 Although Shkreli made no developed argument regarding this 

third alternative treatment, Shkreli suggests that atovaquone 

was another therapeutic alternative to Daraprim for the 

treatment of toxoplasmosis. Atovaquone is an FDA-approved 

antimicrobial drug for treatment of PCP and is prescribed for 

patients who cannot tolerate TMP-SMX. The Guidelines give 

atovaquone a C-III grade for primary prophylaxis of 

toxoplasmosis and a B-II grade as an alternative treatment for 

active toxoplasma encephalitis. Shkreli has not shown that 

atovaquone was either therapeutically or economically 

substitutable with Daraprim. 

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There is no FDA premarket review. No data and 

information are required to demonstrate a compounded 

drug is safe and effective for its intended purposes . 

. . . Compounding large volumes of drugs without 

obtaining FDA approval, which Imprimis apparently 

intends to do, circumvents important public health 

requirements. As a result, it is not appropriate to 

use a compounded product in lieu of an FDA approved, 

commercially available product unless the compounded 

drug provides a medically necessary and unavailable 

drug for a specific patient. 

Vyera’s alarm that compounded pyrimethamine sales might eat 

into Daraprim sales was unfounded. Despite compounded 

pyrimethamine capsules being priced at $1 to $5, there were 

never significant sales of the compounded drug produced by 

Imprimis. The only way a patient could get Imprimis’ compounded 

pyrimethamine product was with a specific prescription for that 

product, which did not permit en masse market substitution. 

Imprimis sold fewer than 22,000 compounded pyrimethamine 

capsules in 2016, and its sales declined thereafter. Avella, 

another compounding pharmacy, sold a total of 1,280 compounded 

pyrimethamine capsules, with no sales after 2018 due to a lack 

of customers. 

Shkreli has pointed out that demand for Daraprim, 

represented by sales volume, dropped precipitously immediately 

after the 2015 price hike. The defendant suggests that 

consumers must have substituted alternative therapies for 

Daraprim. None of the parties have offered comparative data 

regarding TMP-SMX to support or contradict that hypothesis. It 

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would be difficult to draw any conclusions from TMP-SMX data in 

any event because it is a broad-spectrum antibiotic prescribed 

for multiple infectious diseases. Sales of mass-production 

compounded pyrimethamine during the period of Vyera’s sale of 

Daraprim were minimal at best. What can be said with certainty 

is that the market for FDA-approved pyrimethamine was 

sufficiently bound that Vyera was able to raise Daraprim’s price 

to never before seen heights and earn record revenues and 

profits after doing so. 

The practical indicia enumerated in Brown Shoe and the 

other evidence described above strongly support the conclusion 

that doctors and pharmaceutical buyers did not react to the 

astronomical rise in Daraprim’s price by freely switching to 

other, cheaper drugs to treat toxoplasmosis. The demand for 

FDA-approved pyrimethamine remained relatively stable at 

approximately 250,000 tablets per year between 2016 and 2019 

after the initial drop in sales in 2015. If there had been any 

material cross-price elasticity between Daraprim and other 

products at the time of the 4,000% price hike in 2015, 

purchasers would have abandoned Daraprim in favor of cheaper 

products on the market. And if alternative toxoplasmosis 

treatments had been constraining the price of Daraprim before 

March 2020, generic entry would not have resulted in the 

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significant drop in the price for FDA-approved pyrimethamine 

that occurred. 

In sum, as a result of its distinctive attributes, FDAapproved pyrimethamine constitutes the relevant market. It 

treats a distinct patient population; in economic terms, it has 

a distinct kind of customer. 

C. Monopoly Power 

Having defined the relevant market, the conclusion that 

Vyera had a monopoly in that market follows easily. Vyera 

controlled 100% of the market for FDA-approved pyrimethamine 

market between August 2015 and March 2020. Shkreli controlled 

the price of Daraprim, which he acquired precisely because it 

was a sole-source drug in a market of its own. Vyera profitably 

charged a per-tablet average net price for Daraprim ranging 

between $228 and $305 during the full years of 2016, 2017, 2018, 

and 2019. These prices were also substantially above any 

competitive price level, which was at most $160.37 

37 To arrive at a figure of $160, the Plaintiffs’ economic expert 

Hemphill observed the average net price of Daraprim, Dr. Reddy’s 

generic pyrimethamine, and the Vyera AG tablet for a sustained 

period after Dr. Reddy’s generic pyrimethamine entered the 

market. The real-world evidence of Daraprim’s price, volume, 

and market share after Dr. Reddy’s entry in March 2020 starkly 

demonstrates not only that Vyera had a monopoly over Daraprim, 

but also that the high price maintained in that monopoly 

depended entirely on the absence of competition. 

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D. Anticompetitive Conduct 

The Plaintiffs have met their burden under § 1 of the 

Sherman Act of showing that the contracts at issue here were an 

unreasonable restraint on trade and had an adverse effect on 

competition. In response, Shkreli has not shown that the 

contracts had procompetitive benefits. 

Shkreli does not dispute that he intended to block generic 

competition to Daraprim and strove to do so for as long as 

possible. Each of the API supply agreements and the restrictive 

distribution agreements was entered in service of that strategy. 

Similarly, Vyera’s continued monopolistic control of the FDAapproved pyrimethamine market did not occur by accident and 

self-evidently harmed competition. Shkreli raised the price of 

Daraprim by 4,000%. Over more than four years, the average net 

price of a single Daraprim tablet remained hundreds of dollars. 

Its price did not meaningfully decline until Dr. Reddy’s generic 

pyrimethamine penetrated the market barriers Vyera had erected. 

Distribution Contracts 

Vyera’s restrictions in its distribution contracts 

substantially delayed generic pharmaceutical companies from 

acquiring sufficient RLD to conduct BE testing and receive FDA 

approval of their ANDAs. Those restrictions included class of 

trade restrictions and caps on the number of bottles that could 

be sold to a customer. Vyera drastically reduced the number of 

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customers to which its distributors were authorized to sell. 

Vyera monitored distributors’ sales closely to ensure there was 

no leakage. It repurchased inventory and conducted audits to 

learn where every bottle of Daraprim was heading. Vyera’s 

Mulleady even went to a parking lot in New Jersey to buy back 

five bottles of Daraprim, paying twice the purchase price, to 

prevent those bottles from going to a generic pharmaceutical 

company. 

This extraordinarily tight control of the supply of 

Daraprim had its intended effect. It actually delayed the entry 

of generic pharmaceutical companies. 

Vyera paid a sizeable premium to its downstream partners to 

keep Daraprim RLD out of the hands of its competitors. 

Those partners agreed to and enforced the resale restrictions, 

and in doing so benefitted significantly. They profited 

handsomely with each sale so long as Daraprim’s price remained 

inflated. 

All of Shkreli’s purportedly procompetitive justifications 

for these distribution agreements are pretextual. He has argued 

that putting Daraprim in specialty distribution benefitted 

patients by giving them access to services that specialty 

pharmacies can provide. These purported benefits include advice 

on defraying the high cost of the drug, assistance in getting 

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insurance coverage, and help reducing and monitoring adverse 

effects. 

Shkreli offered no evidence, however, that patients were 

assisted in any of these ways. Patients didn’t need help 

figuring out how to pay for Daraprim, of course, until Shkreli 

raised its price to a scandalous level and put his 

anticompetitive scheme in place to protect that price. And 

there is no evidence that FDA-approved pyrimethamine has any 

serious side effects, much less side effects that could be or 

were addressed by any specialty pharmacy. Specialty pharmacies 

and closed distribution are tailor-made for the administration 

and monitoring of drugs that have an altogether different 

profile from that of Daraprim. For decades Daraprim was 

administered safely and without problems through open 

distribution, and both Dr. Reddy’s and Vyera’s own generic 

entrant, the Vyera AG, returned to the open distribution model. 

In sum, Shkreli has failed to justify his choice of a closed 

distribution system. It was designed and used solely to 

restrict competition. 

Exclusive Supply Agreements 

Vyera’s agreements with Fukuzyu and RL Fine closed off 

access to the two most viable suppliers of pyrimethamine for 

years. Vyera’s exclusive supply agreements achieved their 

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intended effect and delayed the entry of generic pyrimethamine 

into the market. 

While the pyrimethamine manufacturing process is relatively 

simple, it still takes time and money to design the process, set 

it up, and test it. Shut out of access to Fukuzyu’s and then 

RL Fine’s API, Fera, Cerovene, and InvaTech were required to 

undertake a time-consuming and costly journey to develop 

alternative API manufacturers. Other than a desire to block 

competition, there was no reason to tie either Fukuzyu or 

RL Fine to exclusive supply agreements. 

Fukuzyu had provided pyrimethamine for Daraprim in the 

United States without any exclusive supply agreement, and at 

times without any supply agreement at all, to Vyera’s 

predecessors. Shkreli decided to change that. After months of 

courting, Vyera and Fukuzyu entered into an exclusive supply 

agreement in January 2017. In October 2016, the same month that 

Vyera’s science executives visited Fukuzyu in Japan, Fukuzyu 

upset Cerovene’s plans and refused to supply it with 

pyrimethamine. In September of 2017, Fukuzyu refused to supply 

Fera with pyrimethamine in a message that repeated, word-forword, the restrictions against human use in the United States 

that Vyera’s Pelliccione relayed to Fukuzyu. 

Vyera’s agreement with RL Fine had a similarly 

anticompetitive purpose and effect. Vyera had no need for any 

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agreement at all with RL Fine. Learning that generic 

competitors were working with RL Fine to obtain pyrimethamine, 

however, Vyera entered into an exclusive supply agreement with 

RL Fine on December 17, 2017. Vyera’s pursuit of this agreement 

had the immediate effect of disrupting and delaying Cerovene’s 

and InvaTech’s ANDA approval process. Vyera paid millions of 

dollars to RL Fine for the sole purpose of blocking its rivals 

from access to RL Fine’s pyrimethamine. The Phoenixus Board 

Minutes of December 2017 justified the expense in these very 

terms. Witness after witness from Vyera has confirmed as much. 

The impact on competitors was immediate. In November 2016, 

Cerovene had entered a five-year exclusive supply agreement with 

RL Fine. In the months that followed, Cerovene invested heavily 

first to support RL Fine filing a DMF and then, switching its 

plans, to support Cerovene itself incorporating the RL Fine 

manufacturing information and data within its own ANDA. 

Cerovene amended its ANDA in April 2017 to list RL Fine as its 

API supplier. But, on November 30, 2017 -- five days after 

Vyera and RL Fine reached an agreement in principle –- RL Fine 

reneged on its contract with Cerovene and refused to supply 

pyrimethamine or cooperate further on a Cerovene pyrimethamine 

ANDA. RL Fine stopped cooperating as well with InvaTech in the 

Fall of 2017, preventing InvaTech from responding to the FDA’s 

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questions about RL Fine’s API and requiring InvaTech to begin 

from scratch and develop a new supplier. 

Shkreli’s attempt to justify the exclusivity provisions in 

these two agreements fail. He relies on the following 

procompetitive justifications: that the agreements ensured a 

steady supply of pyrimethamine and, in the case of Fukuzyu, 

promoted a long-term business relationship. Shkreli contends 

that the exclusivity clauses thus mitigated Vyera’s supply risk. 

Neither contract did so. 

Shkreli has offered no evidence that any manufacturer of 

Daraprim had ever been unable to obtain pyrimethamine from 

Fukuzyu. Moreover, Vyera’s contract with Fukuzyu contained no 

provision that protected it against the risk that Fukuzyu might 

be unable to supply Vyera with FDA-approved pyrimethamine. For 

example, it contained no provision requiring Fukuzyu to maintain 

cGMPs-compliant facilities, to ensure the purity of its API, or 

to keep an active DMF. It did not even require Fukuzyu to fill 

Vyera’s orders for pyrimethamine. There is nothing in the 

agreement that prevented Fukuzyu from selling its entire 

inventory of pyrimethamine to others for use outside the United 

States or for the treatment of animals in the United States. 

There are standard provisions that protect against the risk 

of a loss of supply. Those provisions were absent in the Vyera 

contracts, but tellingly, were present in the GSK contract with 

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Fukuzyu. Those provisions include clauses addressed to the 

forecasting of requirements, customer priority, reserve 

capacity, and firm order dates. 

Moreover, while it may be common for companies to enter 

into exclusive supply agreements with API manufacturers when a 

company has invested time and money with that manufacturer to 

develop a new API manufacturing process, there was no such 

justification here. Fukuzyu already had a DMF on file and had 

been supplying pyrimethamine for Daraprim for decades. 

Shkreli suggests that its contract with Fukuzyu was 

motivated by a desire to build a long-term relationship for 

future toxoplasmosis products. Dr. Salinas testified that Vyera 

has even filed INDs for some of these nascent projects. While 

Vyera may have used its promise of future projects to entice 

Fukuzyu during the contract negotiations, Shkreli has failed to 

explain the relevance of those projects to his desire to include 

a pyrimethamine exclusivity clause in the contract. The 

exclusivity clause had only one purpose, to eliminate 

competition with Daraprim. 

Shkreli’s justification for the RL Fine contract fails 

entirely. Shkreli asserts that it is common in the 

pharmaceutical industry to have a backup supplier. But, Vyera 

has failed to offer any evidence that either Vyera or any of its 

predecessors ever needed a backup supplier of pyrimethamine. 

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Vyera didn’t even pursue a contract with RL Fine until it 

learned that RL Fine was going to supply generic drug companies 

with pyrimethamine. 

Moreover, Vyera’s contract with RL Fine did not ensure that 

RL Fine could operate as a backup supplier if Vyera ever needed 

it to do so. The contract did not require RL Fine to file a DMF 

and RL Fine never did. Nor did the contract require RL Fine to 

do anything to support Vyera if Vyera amended Daraprim’s NDA to 

include RL Fine’s manufacturing process. Instead, during the 

life of the contract, Vyera paid RL Fine almost $9.5 million to 

do nothing except stop cooperating with Vyera’s competitors. To 

put this outlay in perspective, through March 2019, Vyera spent 

only $500,000 buying pyrimethamine from Fukuzyu. 

Finally, Shkreli highlights the fact that the exclusive 

supply agreements were not executed until a date after each 

supplier refused to supply each generic company. Sophisticated 

contracts are not executed on the same day they are negotiated. 

The evidence is overwhelming that Fukuzyu and RL Fine stopped 

cooperating with generic drug companies who wanted to enter the 

U.S. market because they were negotiating exclusive supply 

contracts with Vyera that they considered to be more attractive. 

The incentives that Vyera offered to RL Fine were so enticing 

that it even stopped performing on its five-year contract with 

Cerovene. 

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Degree of Burden on Generic Competitors 

Finally, Shkreli argues that the plaintiffs failed to 

establish that the contracts had a substantial anticompetitive 

effect in the relevant market. Relying on Ohio v. American

Express Co., 138 S. Ct. 2274, 2284 (2018) (“American Express”), 

he emphasizes that it is the Plaintiffs’ burden to show a 

“substantial” anticompetitive effect from his activities and 

that they have failed to do so. Shkreli contends that, whatever 

his intent may have been, the generic manufacturers made a 

series of bad business decisions and were unwilling to spend the 

money necessary to enter the market faster. Shkreli principally 

points to occasions on which Fera or Cerovene did not accept an 

offer by an RLD supplier to find more bottles of Daraprim for 

them. 

Shkreli did not actually prove at trial that RLD suppliers 

were able to acquire more bottles of Daraprim for generic 

pharmaceutical companies after Vyera set up its closed 

distribution system. To the contrary, RLD suppliers struggled 

to fill orders for Daraprim. And, when Reliant used its 

personal connection to a pharmacy to circumvent Vyera’s closed 

distribution system and succeeded in obtaining five bottles of 

Daraprim, Mulleady rushed to buy those bottles back and paid 

twice their purchase price to do so. 

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Shkreli similarly argues that Vyera’s competitors foolishly 

pursued doomed requests to the FDA to modify BE testing 

requirements, and in doing so lost precious time waiting for 

waivers that never came. He argues that it was their flawed 

tactics and not his restrictive agreements that were responsible 

for the delays that occurred here. He is wrong. 

The Plaintiffs proved that Shkreli’s actions had a very 

substantial impact on competition. Under § 1, the Plaintiffs 

may show the existence of anticompetitive effects from 

restraints on trade through direct evidence of increased prices 

in the relevant market, which they have done. See 1-800

Contacts, 1 F.4th at 118. Under the rule of reason test, the 

Plaintiffs have the burden of showing an “actual adverse effect 

on competition as a whole in the relevant market.” Id. at 114. 

Under § 2, the Plaintiffs must show that Shkreli’s improper 

conduct “has or is likely to have the effect of controlling 

prices or excluding competition.” Takeda, 11 F.4th at 137 

(citation omitted). The Plaintiffs have more than carried each 

of these burdens. 

Shkreli’s reliance on American Express is misplaced. The 

holding in that case turned on whether the plaintiffs’ direct 

evidence of price increases on just one side of the two-sided 

credit card transaction market demonstrated any anticompetitive 

effect at all. American Express, 138 S. Ct. at 2287. 

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More importantly, American Express’ unremarkable statement 

of the law did not revise the longstanding rule of reason test 

in antitrust cases. As the Supreme Court has explained, the 

rule of reason steps 

do not represent a rote checklist, nor may they be 

employed as an inflexible substitute for careful 

analysis. . . . [W]hat is required to assess whether a 

challenged restraint harms competition can vary 

depending on the circumstances. The whole point of 

the rule of reason is to furnish an enquiry meet for 

the case, looking to the circumstances, details, and 

logic of a restraint to ensure that it unduly harms 

competition before a court declares it unlawful. 

Nat'l Collegiate Athletic Ass'n v. Alston, 141 S. Ct. 2141, 2160 

(2021) (citation omitted). Even under Shkreli’s rigid view of 

the law, Shkreli’s Daraprim scheme substantially impacted 

competition in the market for FDA-approved pyrimethamine. 

Generic drug companies need not undertake herculean efforts 

to overcome significant anticompetitive barriers specifically 

erected to prevent their entry into a market. It bears 

repeating that “generics need not be barred from all means of 

distribution if they are barred from the cost-efficient ones.” 

Actavis PLC, 787 F.3d at 656 (citation omitted). “The test is 

not total foreclosure, but rather whether the challenged 

practices bar a substantial number of rivals or severely 

restrict the market’s ambit.” Id. While exclusive supply and 

restrictive distribution agreements are not inherently unlawful, 

here their sole purpose and effect was to foreclose generic 

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pharmaceutical companies from acquiring the API and RLD that 

would have otherwise been readily available to them in the 

ordinary course and that were critical to their efforts to 

compete with Vyera. 

E. Shkreli is Individually Liable 

An individual may be held liable under the Sherman Act to 

the extent that the individual has “participated in violations 

of” the antitrust laws, such as by “negotiating, voting for[,] 

or executing agreements which constituted steps in the progress 

of the conspiracy.” Hartford-Empire Co. v. United States, 323 

U.S. 386, 407 (1945); see also Lorain Journal Co. v. United

States, 342 U.S. 143, 145 n.2 (1951) (officers and directors 

“participated in the conduct alleged to constitute the attempt 

to monopolize”). 

Shkreli is liable for the violations of §§ 1 and 2 of the 

Sherman Act and the parallel violations of state law. Shkreli 

conceived of, implemented, maintained, and controlled Vyera’s 

anticompetitive and monopolistic scheme. His control continued 

after he stepped down as Vyera’s CEO and even after he entered 

federal prison. As the company’s largest shareholder, he freely 

changed its management and directed its policy. 

Shkreli pioneered Vyera’s business model at Retrophin and 

brought many of Retrophin’s employees with him to replicate the 

“classic closed distribution play” at Vyera. Shkreli frankly 

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and repeatedly acknowledged that his goal was to delay entry of 

a generic competitor with Daraprim for at least three years. He 

then planned, managed, and controlled the execution of his 

scheme. He erected and policed barriers around the FDA-approved 

pyrimethamine market in order to maintain a monopoly price for 

Daraprim. 

Shkreli emphasizes that he did not sign any of the 

contracts at issue. The absence of his signature from a 

document does not immunize him from antitrust liability. 

Shkreli argues that after December 2015 he was no longer a 

Vyera executive and that his ability to influence Vyera’s 

operations was severely restricted after he was imprisoned in 

September 2017. The Plaintiffs have shown that Vyera remained 

under Shkreli’s control throughout the years it maintained its 

monopoly on FDA-approved Daraprim. Even when incarcerated, 

Shkreli managed to direct its policies and choose Vyera’s 

executives. Whether he used a smuggled phone or the prison’s 

authorized phones, he stayed in touch with Vyera’s management 

and exercised his power over Vyera as its largest shareholder. 

IV. Remedies 

The Plaintiffs seek injunctive relief and the State 

Plaintiffs seek disgorgement. They have shown that Shkreli 

should be banned for life from the pharmaceutical industry and 

required to pay $64.6 million in disgorgement. 

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A. Injunctive Relief 

Section 13(b) of the FTC Act authorizes the FTC to pursue 

permanent injunctive relief in federal court only “in proper 

cases . . . and after proper proof.” 15 U.S.C. § 53(b). 

Plaintiffs must prove an ongoing or likely future violation of 

the antitrust laws and that injunctive relief will not only 

remedy that violation but also “be in the interest of the 

public.” Id. § 53(b)(1)-(2). 

A permanent injunction is appropriate where a plaintiff 

shows that 

there exists some cognizable danger of recurrent 

violation, something more than the mere possibility 

which serves to keep the case alive. . . . To be 

considered are the bona fides of the expressed intent 

to comply, the effectiveness of the discontinuance 

and, in some cases, the character of the past 

violations. 

United States v. W.T. Grant Co., 345 U.S. 629, 633 (1953) 

(Clayton Act). 

To assess the likelihood of recurrence, courts consider 

the fact that defendant has been found liable for 

illegal conduct; the degree of scienter involved; 

whether the infraction is an “isolated occurrence;” 

whether defendant continues to maintain that his past 

conduct was blameless; and whether, because of his 

professional occupation, the defendant might be in a 

position where future violations could be anticipated. 

Sec. & Exch. Comm'n v. Commonwealth Chem. Sec., Inc., 574 F.2d 

90, 100 (2d Cir. 1978). 

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In assessing whether to issue injunctive relief, a court 

balances the equities and considers the public interest. 

E.E.O.C. v. KarenKim, Inc., 698 F.3d 92, 100 (2d Cir. 2012). 

“A Government plaintiff, unlike a private plaintiff, must seek 

to obtain relief necessary to protect the public from further 

anticompetitive conduct and to redress anticompetitive harm.” 

Apple, 791 F.3d at 339 (quoting F. Hoffmann–La Roche Ltd. v.

Empagran S.A., 542 U.S. 155, 170 (2004)). “The district court 

has large discretion to model its judgments to fit the 

exigencies of the particular case and all doubts about the 

remedy are to be resolved in the Government's favor.” Id. 

(quoting E. I. du Pont de Nemours & Co., 366 U.S. at 334). 

In New York, pursuant to the Donnelly Act, the Attorney 

General may seek and obtain an order on behalf of the State “to 

restrain and prevent the doing in this state of any act herein 

declared to be illegal, or any act in, toward or for the making 

or consummation of any contract, agreement, arrangement or 

combination herein prohibited.” N.Y. Gen. Bus. Law § 342. 

Pursuant to § 63(12) of the Executive Law, New York may seek “an 

order enjoining the continuance of [illegal or fraudulent] 

business activity or of any fraudulent or illegal acts.” N.Y. 

Exec. Law § 63(12). Upon finding a violation under Executive 

Law § 63(12), a court may exercise its discretion to issue a 

permanent and plenary ban in a particular industry. See, e.g., 

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People v. Imported Quality Guard Dogs, Inc., 930 N.Y.S.2d 906, 

907 (2nd Dep’t 2011) (permanently enjoining the appellant “from 

selling, breeding, or training dogs, or advertising or 

soliciting the sale, breeding, or training of dogs”). 

The Plaintiffs seek a lifetime ban against Shkreli 

participating in the pharmaceutical industry.38 Banning an 

individual from an entire industry and limiting his future 

capacity to make a living in that field is a serious remedy and 

must be done with care and only if equity demands. Shkreli’s 

egregious, deliberate, repetitive, long-running, and ultimately 

dangerous illegal conduct warrants imposition of an injunction 

of this scope. 

The Plaintiffs presented a wealth of evidence that Shkreli 

conducted a comprehensive scheme that violated the antitrust 

laws of the United States and the competition laws of the seven 

States. The FTC and the States are empowered by federal and 

State law to seek comprehensive equitable relief. The 

Plaintiffs have demonstrated that a lifetime ban against 

Shkreli’s future participation in the pharmaceutical industry 

will protect the public from suffering a repetition of the 

unlawful schemes proven in this case. 

38 In their memorandum, filed with the Pretrial Order, the 

Plaintiffs requested that Shkreli be banned for twenty years 

from the pharmaceutical industry. 

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Without a lifetime ban, there is a real danger that Shkreli 

will engage in anticompetitive conduct within the pharmaceutical 

industry again. 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. The Daraprim scheme was 

particularly heartless and coercive. Daraprim must be 

administered within hours to those suffering from active 

toxoplasma encephalitis. 

Moreover, in the face of public opprobrium, Shkreli doubled 

down. He refused to change course and proclaimed that he should 

have raised Daraprim’s price higher. 

The context in which Shkreli conducted his schemes cannot 

be ignored. He cynically took advantage of the requirements of 

a federal regulatory scheme designed to protect the health of a 

nation by ensuring that its population has access to drugs that 

are not only effective but also safe. He recklessly disregarded 

the health of a particularly vulnerable population, those with 

compromised immune systems. His scheme burdened those patients, 

their loved ones, and their healthcare providers. 

A lifetime ban would not deprive Shkreli of the opportunity 

to practice a profession or to exercise a lawful skill for which 

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he trained. In his trial testimony Shkreli does not even 

express a clear desire to return to the pharmaceutical industry. 

He reports that he is considering pursuing opportunities “within 

and outside” the pharmaceutical industry upon his release from 

prison. 

The risk of a recurrence here is real. Shkreli has not 

expressed remorse or any awareness that his actions violated the 

law. While he takes full responsibility in his direct testimony 

for the increase of Daraprim’s price from $17.50 to $750 per 

pill, he denies responsibility for virtually anything else. He 

argues in his testimony that he is not responsible for Vyera’s 

anticompetitive contracts because he did not negotiate or sign 

the exclusive supply agreements or the restrictive distribution 

agreements. He has also denied that what happened here was 

egregious, arguing that the Plaintiffs have not proven that any 

patient died due to the price he set for Daraprim. He chose to 

not even attend the trial. 

Shkreli presents several legal arguments against a lifetime 

industry ban. He contends that it amounts to a penalty beyond 

the proper scope of a court’s power in equity. He argues that 

an industry ban is uncommon and reserved only for the most 

egregious cases and for cases of fraud. He argues that a ban of 

this scope is not narrowly tailored to match the challenged 

conduct. For the reasons laid out above, these arguments are 

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unavailing. This is an egregious case; death is not the only 

relevant metric. If a court sitting in equity is powerless to 

impose a lifetime industry ban to protect the public against a 

repetition of the conduct proven at this trial, then the public 

could rightfully ask whether its wellbeing has been adequately 

weighed. 

Shkreli appears to suggest that any injunction could be 

limited to banning him from acquiring commercial assets or 

engaging in the “day-to-day affairs of commercializing 

medicine.” There is no reason to believe that a narrowly 

crafted injunction will succeed in providing adequate protection 

against a repetition of illegal conduct. Shkreli has 

demonstrated that he can and will adapt to restrictions. With 

help at times from a contraband phone, Shkreli managed to 

control his company even from federal prison. 

Shkreli’s anticompetitive conduct at the expense of the 

public health was flagrant and reckless. He is unrepentant. 

Barring him from the opportunity to repeat that conduct is 

nothing if not in the interest of justice. “If not now, when?” 

Mishnah, Pirkei Avot 1:14. 

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B. Disgorgement 

The State Plaintiffs seek disgorgement in the amount of 

$64.6 million to return to victims nationwide.39 Disgorgement is 

“a remedy tethered to a wrongdoer’s net unlawful profits” and 

“has been a mainstay of equity courts.” Liu v. Sec. & Exch.

Comm'n, 140 S. Ct. 1936, 1943 (2020). “The district court has 

broad discretion not only in determining whether or not to order 

disgorgement but also in calculating the amount to be 

disgorged.” S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450, 

1474–75 (2d Cir. 1996) (federal securities laws violations). 

“The amount of disgorgement ordered need only be a reasonable 

approximation of profits causally connected to the 

violation. . . . So long as the measure of disgorgement is 

reasonable, any risk of uncertainty should fall on the wrongdoer 

whose illegal conduct created that uncertainty.” S.E.C. v.

Razmilovic, 738 F.3d 14, 31 (2d Cir. 2013), as amended (Nov. 26, 

2013). 

The Second Circuit has “adopted a two-step burden-shifting 

framework for calculating equitable monetary relief. That 

framework requires a court to look first to the [plaintiff] to 

show that its calculations reasonably approximated the amount of 

39 The FTC is precluded from seeking disgorgement. Vyera, 2021 

WL 4392481, at *2. 

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the defendants’ unjust gains and then shift the burden to the 

defendants to show that those figures were inaccurate.” Fed.

Trade Comm'n v. Moses, 913 F.3d 297, 310 (2d Cir. 2019) 

(citation omitted). 

New York Executive Law § 63(12) empowers the New York 

Attorney General to disgorge unlawfully gained profits wherever 

they were derived. Vyera, 2021 WL 4392481, at *4. Contrary to 

Shkreli’s contention, there is no legal distinction between 

equitable monetary remedies available for fraudulent conduct and 

other illegal conduct occurring in the State of New York. The 

Plaintiffs have shown that the anticompetitive conduct in this 

case is at least as egregious in terms of its willfulness and 

harm to victims as the frauds typically subject to this 

equitable remedy under § 63(12). 

The excess profits that Vyera gained from its sales of 

Daraprim amount, conservatively, to $64.6 million and must be 

disgorged to the States, subject to a set-off of any amount paid 

by the settling defendants. Shkreli is liable for this relief. 

In arriving at this amount, a threshold determination is 

the hypothetical date or dates on which generic drug companies 

would have entered the market but-for Vyera’s anticompetitive 

conduct. Here, the evidence is sufficiently robust to select 

those dates for two competitors, Cerovene and Fera. The record 

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is insufficiently developed regarding the three other 

competitors who have entered or tried to enter the market. 

Cerovene and Dr. Reddy’s Hypothetical Entry Date 

Cerovene’s president Shah estimates that his company’s FDAapproved generic pyrimethamine tablet, which entered the market 

in March of 2020, would have entered the market in September of 

2017 if Cerovene had had unfettered access to Fukuzyu’s API and 

the RLD. This is a thirty-month delay. This estimate was 

unchallenged at trial. 

Plaintiff’s economic expert Hemphill calculated Vyera’s 

excess profits using two alternative hypothetical entry dates 

for Cerovene: October 2018 and December 2018. The October 2018 

entry date is an extremely conservative date on which to base 

the calculations, and is adopted for the calculation of excess 

profits. The difference between October 2018 and March 2020 

represents an eighteen-month delay. 

Fera’s Hypothetical Entry Date 

Fera’s DellaFera estimates that his FDA-approved 

pyrimethamine tablet, which entered the market soon after it 

received FDA approval in July of 2021, would have entered the 

market in August of 2019 if Fera had unfettered access to 

Fukuzyu’s API and to the RLD. This is a delay of roughly 

twenty-four months. His estimate was unchallenged at trial. 

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Hemphill calculated Vyera’s excess profits on the 

assumption that Fera’s generic drug would have entered the 

market in October 2019, representing a twenty-three month delay. 

The October 2019 date is a conservative estimate and is adopted 

for the calculation of excess profits. 

Vyera’s Excess Profits 

Hemphill’s model for calculating these counterfactual 

profits involves four steps. First, he calculated Daraprim’s 

actual revenue from October 2018 to December 2020. 

Conservatively, it was $130.6 million. 

Next, he calculated Vyera’s revenue in the but-for world 

during that same period under a number of conditions, including 

different generic entry dates, the numbers of generic 

competitors, and the effect from Vyera launching its own 

authorized generic earlier. Those calculations based on the 

October 2018 entry date for Cerovene’s drug and the October 2019 

entry date for Fera’s drug are the relevant calculations here. 

Third, using simple arithmetic, Hemphill calculated the 

difference between Vyera’s actual profit and its profits in the 

but-for world in which competitive entry was not impeded by 

Vyera’s conduct. Hemphill determined that, but-for Vyera’s 

illegal conduct, it would have earned $67.6 million less in 

Daraprim revenue during that period. 

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Finally, taking into account that in the counterfactual 

world Vyera’s incremental costs would have been lower because it 

would be selling less Daraprim, Hemphill deducted an estimated 

$3 million in costs that Vyera would have avoided. This fourstep process yields a conservative estimate of $64.6 million in 

excess profits. 

Shkreli has offered no different calculation of excess 

profits, including any opposing calculation based on later 

generic entry dates or competing assumptions. Accordingly, the 

Plaintiff States’ calculation of $64.6 million in excess profits 

from the sale of Daraprim is adopted. 

C. Shkreli’s Liability for Vyera’s Excess Profits 

Disgorgement may be imposed against multiple defendants so 

long as the order is consistent with equitable principles. See

Liu, 140 S. Ct. at 1949 (remanding to the Ninth Circuit to 

determine whether “circumstances would render a joint-andseveral disgorgement order unjust”). Joint and several 

liability for disgorgement is properly imposed when multiple 

defendants have collaborated in an illegal scheme. S.E.C. v.

Pentagon Cap. Mgmt. PLC, 725 F.3d 279, 288 (2d Cir. 2013). In 

First Jersey, an individual defendant was required to disgorge 

net profits accruing to his company where he was “primarily 

liable” for the fraud that created these profits, was 

“intimately involved” in the perpetration of the fraud, and was 

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a “controlling person” of the company. 101 F.3d at 1475 

(citation omitted). 

Shkreli was the prime mover in this anticompetitive 

scheme. It was his brainchild and he drove it each step of 

the way. As Vyera’s founder and its largest shareholder, 

any excess profit gained from Shkreli’s scheme directly 

benefited him. Shkreli explains in his direct testimony 

that he took the actions he did at Vyera based on his 

belief that the “entry of a generic alternative to Daraprim 

. . . would have a significant effect on my investment in 

the company.” Liability for the sum of equitable monetary 

relief determined in this Opinion is, therefore, properly 

imposed against him. 

The sum owed by Shkreli will be reduced by any monies paid 

by the settling defendants. A settlement payment may properly 

“be taken into account by the court in calculating the amount to 

be disgorged.” Id. 

Shkreli argues that, following the Supreme Court’s decision 

in Liu, he may no longer be held jointly and severally 

responsible for Vyera’s excess profits. Shkreli relies on Liu’s 

statement that allowing joint and several liability alongside 

the remedy of disgorgement “runs against the rule to not impose 

joint liability in favor of holding defendants liable to account 

for such profits only as have accrued to themselves.” Liu, 140 

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S. Ct. at 1945 (citation omitted). According to Shkreli, the 

amount of disgorgement he may be ordered to pay is limited to 

any profits he actually took from the scheme, and the Plaintiffs 

have failed to show that Shkreli personally profited at all. 

Liu did not categorically reject a disgorgement order 

imposed against multiple parties. Liu in fact held that joint 

and several liability for disgorgement orders is permissible as 

long as they are consistent with equitable principles. Id. at 

1949. The Supreme Court specifically noted that, since the 

common law permitted “liability for partners engaged in 

concerted wrongdoing . . . [t]he historic profits remedy thus 

allows some flexibility to impose collective liability.” Id. 

In this case, imposition of a disgorgement order against 

Shkreli serves the interests of justice, for all the reasons 

explained above. Shkreli was no side player in, or a “remote, 

unrelated” beneficiary of, Vyera’s scheme. See id. He was the 

mastermind of its illegal conduct and the person principally 

responsible for it throughout the years. 

Conclusion 

Shkreli is liable on each on the claims presented in this 

action. An injunction shall issue banning him for life from 

participating in the pharmaceutical industry in any capacity. 

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