Lannett Investors Say DOJ Action Is Imminent

PHILADELPHIA (CN) – Saying the drugmaker is poised to face price-fixing charges, investors claim that Lannett has been lying for years to securities regulators.

Filed on Nov. 16 with a federal judge in Philadelphia, the lawsuit by lead plaintiff John Utesch comes on the heels of an article by Bloomberg that says the U.S. Justice Department is preparing to bring charges after a two-year investigation of pharmaceutical price collusion.

Lannett’s shares dropped 27 percent after the Nov. 3 article, according to the complaint.

The Philadelphia-based drugmaker has faced class actions before over its pricing of the generic antibiotic doxycycline and the heart medication digoxin. The former rose by 8,281 percent is less than a year from October 2013 to April 2014, whereas the price of digoxin increased over 800 percent.

Despite the increasing regulatory scrutiny Lannett has faced, Utesch says it did not adjust its outlook in filings with the Securities and Exchange Commission.

“Specifically,   Defendants   made  false  and/or misleading   statements   and/or  failed  to  disclose  that:  (1)   Lannett’s   drug  pricing  relied  on unsustainable pricing methodologies;  (2) Lannett lacked effective internal controls concerning its drug pricing methodologies; (3) as a result, Lannett’s  public statements were materially false and misleading  at all relevant times and spurred ongoing investigations  by the State of Connecticut Office  of  the  Attorney  General  and  the  U.S.  Department  of  Justice,” the complaint states. “Media  outlets reported that the underlying conduct would likely lead U.S. prosecutors to file criminal charges against Lannett by the end of 2016 for suspected price collusion.”

In addition to Lannett, the complaint names as defendants CEO Arthur Bedrosian and chief financial officer Martin Galvan.

The 23-page complaint alleges violations of Sections 10(b) of the Exchange Act and Rule 10b-5, as well as a violation of Exchange Act Section 20(a).

Lead counsel for the class is Jacob Golberg of the Rosen Law Firm in Jenkintown, Pa.

Representatives from Lannett did not return a request for comment.

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