On March 2, the Department of Justice announced that Sandoz, a major generic pharmaceutical company, will pay a $195 million fine to the federal government for conspiring to fix prices and rig bids to curb competition for generic drugs.
The Justice Department says this is the largest fine they have imposed in a domestic antitrust case. Sandoz was charged with four counts of felony charges for conspiring to allocate customers, rig bids, and fix prices for generic drugs.
Officials said the company conspired between the years 2013 and 2015 with other drug manufacturers and their executives to set low prices for their products to prevent new suppliers from entering the market or to drive their competitors out of business.
The Antitrust Division announced a Deferred Prosecution Agreement(DPA) which would resolve the charges against Sandoz. Under this deferred prosecution agreement, Sandoz agrees to fully cooperate with the ongoing criminal investigation and will be deferred for three years.
According to a press release from the Department of Justice, the Assistant Attorney General Makan Delrahim said, “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.”
As of now, this is the seventh case filed in the Antitrust Division’s ongoing investigation into the generic pharmaceutical industry. Sandoz is one of three pharmaceutical companies admitting to criminal charges. Heritage and Kavod Pharmaceuticals have also agreed with DPA’s with the government.
Sandoz admitted to the following four felony charges. One, Sandoz was conspiring with Taro Pharmaceuticals USA to fix prices for drugs that included clobetasol, desonide ointment, and nystatin triamcinolone cream; these are topical creams primarily used for inflammation on the skin.
Two, Sandoz was conspiring with Kavod Pharmaceuticals, LLC to allocate customers and fix prices of benazepril HCTZ, a drug to lower high blood pressure.
Three, Sandoz was conspiring with a generic drug company based in Michigan for drugs that included desonide ointment, a steroid cream to help with dermatitis.
Lastly, they were charged for conspiring with a generic drug company based in Pennsylvania for drugs that included tobramycin inhalation solution, which treats infections such as cystic fibrosis.
Most of the drugs involved in price-fixing are used to treat chronic problems and pain associated with arthritis, hypertension, seizures, various skin conditions, and blood clots, according to the Department of Justice.
Accepting the DPA allows Sandoz to avoid a $100 million fine for each count. The decision to utilize deferred prosecution came about due to the impact the case would have on the public because official government regulations ban health care suppliers with certain convictions from participating in any health care programs.
The former senior executive of Sandoz, Hector Armando Kellum, pleaded guilty last month to conspiring with other drug company executives to fix prices and rig bids for generic drugs. Two other executives have also pleaded guilty, while another one has been indicted and is awaiting trial.
Nonetheless, Sandoz is accepting responsibility for their misbehavior and is currently cooperating with the investigation.
According to an article by the New York Times, Sandoz President Carol Lynch said,
“We are disappointed that this misconduct occurred in the face of our clear antitrust compliance policies and multiple training — and in full contravention of the company’s values.”
While Sandoz is set to pay $195 million, they are also in negotiations with the Justice Department’s civil division to resolve potential linked claims and are also setting aside $185 million for this reason.
