A growing coalition of US states has formally objected to a provision in Florida’s $10m settlement with generic drugmaker Sandoz, arguing it unfairly restricts their ability to negotiate independent and potentially larger payouts.

In a motion filed in federal court, 20 states plus the District of Columbia and US Virgin Islands urged the judge to strike a “most favored nation” clause that would impose financial penalties on Sandoz if it settles with other states for more than Florida’s adjusted share.

The clause, critics say, could suppress total recoveries for up to four years and give Sandoz disproportionate leverage in broader antitrust negotiations.

Connecticut, one of the lead plaintiffs in the years-long multidistrict litigation, warned that the provision, entered deep into the litigation timeline, risks delaying resolution for other plaintiffs and weakening accountability for admitted price-fixing. Citing past court rulings, the states noted that such clauses can distort the settlement process and undermine the very objective of resolving large-scale, multi-party litigation.

Generic drug prices

Between 2009 and 2016, generic drug prices in the US defied the logic of competition. Instead of falling as more manufacturers entered the market, prices of staple generics like doxycycline and albuterol skyrocketed – by over 8,000% in some cases.

These eye-watering increases were not anomalies, but symptoms of a broader, coordinated scheme with drugmakers colluding to fix prices, allocate customers, and sustain artificially high profits.

Operating under the industry euphemism “fair share,” defendants, including major generics manufacturers, agreed not to undercut each other on price or compete for market share. Instead, they orchestrated a manufactured equilibrium where each firm preserved its slice of the market while prices rose unchallenged.

In a sector where drugs are interchangeable and tightly regulated, such collusion was easy to track and devastating in impact, especially for institutional buyers like states and private employers.

Sandoz, which has already paid more than half a billion dollars in related settlements and admitted to criminal conduct in a 2020 deferred prosecution agreement with the DOJ, now faces mounting pressure from both public and private claimants.

As more plaintiffs pile in, the states’ challenge to Florida’s settlement signals a broader push to prevent corporate defendants from locking in artificially low benchmarks that could cascade across the industry.