Bristol-Myers Squibb's (NYSE:BMY) Celgene unit, which the big pharma company acquired last year, has backed out of a $55 million settlement agreement with patients and payers over claims that it unfairly thwarted generic drug competition for Thalomid and Revlimid. The patients and payers claim that Celgene blocked generic drug companies from buying the multiple myeloma medications, while also increasing the prices of the drugs.

Generic drug companies need branded medication to do comparison studies with their copycat versions, but Celgene reportedly blocked the companies from buying the drugs because the medicines are covered under a Food and Drug Administration-mandated distribution program called a Risk Evaluation and Mitigation Strategy (REMS), which requires pharmacists and patients to enroll in the REMS program before receiving the drugs.

The plaintiffs also claimed that Celgene tried to enforce patents that weren't valid and entered into anti-competitive agreements with generic drug companies. In 2015, Celgene settled a lawsuit with generic-drug maker, Natco Pharma, providing Natco with a volume-limited license to sell generic Revlimid starting in March 2022 that increases in volume each year until Jan. 31 2026 when Natco will be able to sell an unlimited quantity of its generic version.

Courthouse

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In July, while Celgene was still an independent company, the biotech agreed to the $55 million class action settlement, but the agreement was predicated on the class members signing onto the lawsuit. More than 8,000 individuals and more than 800 payers -- insurance companies and companies who self-insure -- agreed to the settlement, but 80 entities opted out, preserving their right to sue independently, which led to Bristol-Myers Squibb pulling out of the lawsuit.

The lawsuit will now continue with the plaintiffs suing Celgene for $3 billion, the extra amount the plaintiffs claim they paid because generic drugs weren't available.