Pharma CEO Admission, Fall 2014: “PBMs don’t make their money off of rebates anymore”; they “make their money off of service fees” – fees from drug companies tied to massive U.S. “sticker” price increases.

“PBMs don’t make their money off of rebates anymore”.

“PBMs make their money off of service fees”  – these PBM “fees” come from drug companies as a “percent” of brand drug “sticker” or “list” prices.

“You just have to play ball with them (PBMs)” to get a contract.

These were some of the firsthand statements casually stated to me at a private investor meeting in the fall of 2014 by the CEO of a mid-sized pharmaceutical company, Depomed. The former CEO of Depomed is a nice gentleman that I have known for more than 20 years and had met with many times as a long-term professional investor in his company.

The CEO’s statements in 2014 came in reply to my inquiry as to how Depomed was able to get the leading health insurer/PBMs to accept recently announced massive U.S. “list” price increases for its neurologic pain therapy, Gralise, a once daily version of a widely generically available drug, gabapentin.  At the time, Gralise was struggling to gain market share and sales due to severe competition from generic gabapentin and an array of other brand drugs, especially Pfizer’s Lyrica, a drug closely related to Neurontin.

Lyrica was one of Pfizer’s top-selling brands and a top-spending drug in Medicare Part D. Lyrica is one of the key Defendant drugs in my Southern District of New York (SDNY) “fee” whistleblower qui tam case. Almost all of Pfizer’s vast U.S. revenue growth for Lyrica over the past decade-plus has been driven by massive price increases while use of the drug by physicians and patients has stagnated – clearly indicative of anti-competitive activity.

Just as with Pfizer’s Lyrica, it made no legitimate competitive sense that Depomed would be able to suddenly and massively raise the U.S. “sticker” price of Gralise in the face of severe competition. It made even less sense that the price increases would be accepted by the handful of dominant health insurer/PBMs that control 80-90% of the U.S. market and have vast negotiating leverage.

Despite all this, that is exactly what happened.  

The Depomed CEO went on to casually state to me in the November 2014 meeting:

You just have to give the PBMs a “percent” of the “list” price increases to get a contract.

The Depomed CEO then readily disclosed that he had just completed national contracts, both for private health insurance and Medicare Part D, with 3 of the largest PBMs, namely Express Scripts (now part of Cigna), CVS (now combined with Aetna) and Catamaran (now part of United Health).

Occurring less than a year from my first whistleblower case filing in January 2014, I viewed the Depomed CEO’s firsthand voluntary admission as further definitive evidence of the simple “fee” price collusion behind systemic U.S. brand drug price abuses. As per my last blog post, I had already provided 40-45 firsthand insider witnesses to DOJ from an industry conference I attended in October 2013.

Hard to imagine that the Depomed CEO voluntary admission about the simple “fee” scheme could have been any clearer, right?

Certainly  was to me.

As an experience federal whistleblower seeking to assist our government, I relayed the information to the DOJ staff leading the investigation of my qui tam case, but received no feedback or follow-up.  

I later included the October 2014 Depomed CEO admissions in the Amended legal Complaints for my cases, which were filed in two Federal District Courts in August 2018, after the government declined to pursue the cases.

See the link to the whistleblower legal document discussion of the Depomed CEO admission in the “Definitive Proof” tab of the website:

To my surprise, the DOJ never apparently pursued the Depomed CEO. Just as DOJ never pursued the large number of firsthand witnesess from the October 2013 “fee” conference, including employees at the Defendant companies.

As per my unrebutted affidavit to both Federal Courts, DOJ repeatedly admitted to me and my attorney (and in Court documents) that not a single pharmaceutical executive was ever interviewed under oath in the 4+ year “extensive” government investigation of these two qui tam cases – the largest in history by a wide margin.

To my greater surprise, neither District Court apparently considered the Depomed CEO admission either, in addition to a wide array of other factual evidence and firsthand witnesses ignored by the DOJ, when they granted the government’s request to dismiss the cases in their entirety.

In fact, in granting DOJ’s last-minute request to dismiss the whistleblower cases, the Federal Courts admitted that they did not even consider the merits of the cases and all the extensive evidence that had been provided.

Both Courts said that looking at merits of the cases was not needed because the DOJ’s claims regarding its “resource” limitation claims alone were sufficient to dismiss the cases in their entirety.

Imagine. Two Federal Courts dismissing the two largest whistleblower cases in history, which allege more than $175 billion in ongoing public harm and countless patient deaths, without even considering the merits of the cases or the vast amount of patient and pubic harm.

Hard to fathom, right? But that is what happened.

You can read the SDNY Court order granting full dismissal at this link:

The SDNY whistleblower case alleges, in extensive detail, $115+ billion in ongoing public harm driven by 5-10 fold price increases on an array of blockbuster cancer, insulin, rheumatoid arthritis and other drugs.

You can read the District of Rhode Island Court order granting full dismissal at this link:

The District of Rhode Island whistleblower case alleges, in extensive detail, $60+ billion in ongoing public harm driven by 10-fold U.S. multiple sclerosis (MS) price increases, mostly for drugs in plummeting use.

The District Court orders are very quick reads, only seven and ten pages, respectively.

After reviewing these brief Court decisions, then consider that the other hundreds of pages of whistleblower Court documents on this website, with extensive evidence and firsthand witnesses, were not considered by either Federal Court in allowing the full case dismissals by DOJ.  

Both Federal Courts also largely ignored my 12-page affidavit under oath of our extensive firsthand DOJ admissions of failure to investigate these whistleblower cases. My affidavit was not rebutted under oath by DOJ in either Federal Court.

Further, both whistleblower cases were dismissed by the District Courts in their entirety against all these dominant pharmaceutical and health insurer/PBM Defendants without them ever having to answer a single question in the either Federal Court.

Hard to imagine, right? But, sadly true.

The two District Court dismissal rulings are now in the process of being appealed at higher Courts.

You can read about our basis for appeal of these decisions in the “Case Appeals” section of this website via this link:

DOJ is scheduled to reply to our appeal brief for the SDNY case in the Second Circuit Court of Appeals by March 23. We will provide an blog post update when it occurs.

We are awaiting a Court timeline to file the appeal brief in the First Circuit regarding the District of Rhode Island multiple sclerosis (MS) drug case.

I welcome the opportunity to speak to any interested parties.

My focus remains on stopping severe, ongoing and escalating  patient, family and public abuse caused by this simple “fee” price collusion scheme. 

“People Before Profits”

I can be easily reached via email at

Thank you,

John R. Borzilleri, M.D.

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