Sandoz Admits Rigging Prices -- WSJ
March 03 2020 - 3:02AM
Dow Jones News
By Brent Kendall and Jared S. Hopkins
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 3, 2020).
WASHINGTON -- Novartis AG's Sandoz subsidiary will pay a $195
million criminal penalty for fixing prices on generic drugs, the
Justice Department said Monday.
The department said Sandoz admitted it was guilty of
participating in several conspiracies to rig bids and fix prices on
an array of generic medicines.
Sandoz entered into a deferred prosecution agreement and is
cooperating with the federal government's continuing investigation,
the department said. The criminal penalty was the highest the
department has assessed for a purely domestic price-fixing cartel,
officials said.
Under the agreement, the four felony counts against Sandoz will
be dropped after three years if it lives up to its commitments to
the Justice Department.
"Today's resolution, with one of the largest manufacturers of
generic drugs, is a significant step toward ensuring that prices
for generic drugs are set by competition, not collusion, and
rooting out antitrust crimes that cheated American purchasers of
vital medicines," said Assistant Attorney General Makan Delrahim,
the Justice Department's antitrust chief.
The conspiracies took place between 2013 and 2015, including for
drugs that treated people with hypertension, cystic fibrosis and
skin conditions. Affected drug sales totaled more than $500
million, the department said.
"We are disappointed that this misconduct occurred in the face
of our clear antitrust compliance policies and multiple trainings
-- and in full contravention of the company's values," said Sandoz
President Carol Lynch.
Two other firms, Rising Pharmaceuticals Inc. and Heritage
Pharmaceuticals Inc., reached deferred-prosecution agreements with
the department last year, with much smaller fines.
The department said in court papers it agreed to defer the
Sandoz prosecution because a felony conviction would likely exclude
the company from federal health-care programs, a predicament that
could lead to substantial consequences not only for the company,
but for competition in the industry.
For several years, the generic-drug industry has faced scrutiny
from federal and state officials over alleged price-fixing of
dozens of its medicines, including treatments for diabetes,
arthritis and cancer. Most states have also sued companies and
executives over alleged price-fixing of generic drugs.
So far, three drug-industry executives have pleaded guilty to
federal charges related to the price-fixing, while a fourth was
indicted and awaits trial. Last month, former Sandoz executive
Hector Armando Kellum pleaded guilty to his role in a generic-drug
price-fixing scheme.
State attorneys general originally filed a civil lawsuit in 2016
against six companies, accusing them of conspiring to manipulate
prices for doxycycline hyclate, an antibiotic, and glyburide, used
in the treatment of diabetes.
Generic drugs account for 90% of prescriptions written by
doctors in the U.S. but just 22% of overall drug spending in the
country, according to the generic-drug lobbying group, the
Association for Accessible Medicines.
Unlike the branded-drug industry, where new therapies are
granted patent exclusivity for several years, generic-drug
companies compete in the open market. The first generic to a novel
therapy approved by the FDA typically gets six months to compete on
its own before other companies can launch their generic drugs.
Drug prices fall about 50% after a second generic enters the
market, according to an FDA analysis.
The price-fixing investigation hasn't been the only thing
shaking the industry. It has been rattled by competition from
Indian makers and under pricing pressure from the groups in the
U.S. that buy and distribute the drugs.
Write to Brent Kendall at brent.kendall@wsj.com and Jared S.
Hopkins at jared.hopkins@wsj.com
(END) Dow Jones Newswires
March 03, 2020 02:47 ET (07:47 GMT)
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