U.S. prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion, a fresh challenge for an industry that’s already reeling from public outrage over the spiraling costs of some medicines.
According to the story in Bloomberg news, the antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, they said.
Though individual companies have made various disclosures about the inquiry, they have identified only a handful of drugs under scrutiny, including a heart treatment and an antibiotic. Among the drugmakers to have received subpoenas are industry giants Mylan NV and Teva Pharmaceutical Industries Ltd. Other companies include Actavis, which Teva bought from Allergan Plc in August, Lannett Co., Impax Laboratories Inc., Covis Pharma Holdings Sarl, Sun Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd., Endo International Plc’s subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical Industries Ltd.
All of the companies have said they are cooperating except Covis, which said last year it was unable to assess the outcome of the investigation.
“Teva is not aware of any facts that would give rise to an exposure to the company with respect to these subpoenas,” Teva spokeswoman Denise Bradley said in an e-mail. “To date, we know of no evidence that Mylan participated in price fixing,” Mylan spokeswoman Nina Devlin said in an e-mail. Mayne continues to cooperate with the Justice Department and believes the investigations will not have a material impact on its future earnings, the company said in a statement on Thursday.
Drug pricing has met harsh criticism from U.S. lawmakers in the past year. Former hedge fund manager Martin Shkreli set off the firestorm and drew the ire of Democratic presidential candidate Hillary Clinton after he acquired an old antiparasitic drug and raised the price to $750 a pill from $13.50. Valeant Pharmaceuticals International Inc. was lambasted by Congress for boosting prices of older drugs. In September, representatives grilled Mylan Chief Executive Officer Heather Bresch over the company’s sixfold price increase since 2007 to $600 for a pair of EpiPen allergy shots.
While attention so far has been focused mainly on branded drugs, which are more expensive, the Justice Department probe is now bringing the generics industry into the fray.
Although it isn’t illegal for companies to raise prices at the same time, it’s against the law for competitors to agree to set prices or coordinate on discounts, production quotas or fees that affect prices. The federal government can prosecute companies for collusion and seek penalties and potentially send executives to jail.
Charges could extend to high-level executives, according to the people. The antitrust division, which has an immunity program to motivate wrongdoers to confess and inform on others, has stepped up its commitment to holding individuals responsible.