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US Files First Charges in Generic Drug Price-Fixing Probe

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Wednesday, 14 Dec 2016 01:11 PM

The Justice Department accused two executives of colluding with other generic pharmaceutical companies to fix prices, the first criminal charges stemming from a sweeping two-year investigation.

Jeffrey Glazer, a former chief executive officer of Heritage Pharmaceuticals Inc., and Jason Malek, an ex-president, were charged in Philadelphia, according to court filings unsealed on Wednesday. Each were charged in a criminal information with two counts of conspiring with other drug makers to fix the prices of an antibiotic and a drug used to treat diabetes. An information is often used as part of a plea agreement with prosecutors.

From April 2013 to at least December 2015, Glazer and Malek conspired with others in the production and sale of generics including doxycycline hyclate and glyburide, according to the court papers.

“Millions of Americans rely on prescription medications to treat acute and chronic health conditions," Deputy Assistant Attorney General Brent Snyder of the Justice Department’s antitrust division said in a statement. The charges are an important step "in ensuring that generic pharmaceutical companies compete vigorously to provide these essential products at a price set by the market, not by collusion.”

Representatives for Heritage, which is privately held, weren’t immediately available to comment.

Heritage Lawsuit

Glazer and Malek were fired from Heritage in August, according to a civil lawsuit filed against the two executives by their former employer last month in federal court in New Jersey. Heritage accused them of stealing tens of millions of dollars from the company over at least seven years, according to that complaint.

"Glazer and Malek accomplished this brazen theft by creating at least five dummy corporations, which they used to siphon off Heritage’s profits through numerous racketeering schemes," Heritage alleges. "Through one particularly audacious scheme, Glazer and Malek, together with other co-conspirators, secretly arranged deeply discounted sales of Heritage products to their dummy corporations or through complicit third parties willing to act as straw buyers in return for bribes."

Glazer and Malek then illicitly pocketed the profit that resulted when Heritage customers paid the market price for the drugs, Heritage said in the lawsuit.

The magnitude of the theft is captured in an August 2015 text message exchange in which Glazer told Malek that they had netted $466,000 in profit in one day. Glazer then wrote to Malek "distro $100k each" which Heritage said referred to distribution of the proceeds. Malek responded: "that’s it?"

Lawyers for Glazer and Malek in the civil case didn’t immediately respond to email messages seeking comment.

Sweeping Investigation

The U.S. antitrust investigation spans more than a dozen companies and about two dozen drugs, people familiar with the matter told Bloomberg last month. 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 in the investigation except Mayne, which said it didn’t expect the inquiry to have a material impact on earnings, and Covis, which said last year it was unable to assess the outcome of the investigation.

A representative for Mayne Pharma Group Ltd., based in Australia, didn’t immediately return messages left outside of normal business hours.

Generics Slump

Shares of other drugmakers that have disclosed subpoenas related to the probe fell. Mylan dropped 2.6 percent to $37.30 at 12:04 p.m. in New York, Endo International Plc fell 3.8 percent to $15.35, Lannett Co. fell 2.6 percent to $24.30 and Teva Pharmaceutical Industries Ltd. fell 1.6 percent to 140.60 shekels.

None of the companies in the government’s investigation are named in the case against Glazer and Malek. Heritage, which is identified only as Company A in the documents, is a subsidiary of Emcure Pharmaceuticals Ltd., based in Pune, India.


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The Justice Department accused two executives of colluding with other generic pharmaceutical companies to fix prices, the first criminal charges stemming from a sweeping two-year investigation.
drug, pricing fixing, charges, generic
Wednesday, 14 Dec 2016 01:11 PM
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