New Jersey Pharma Company Settles Price-Fixing Allegations

PHILADELPHIA (CN) – Heritage Pharmaceuticals reached a $7 million deal Friday to settle U.S. criminal and civil price-fixing charges.

The agreement resolves False Claims Act allegations that Heritage paid and received remuneration from other drug companies between 2012 and 2015, part of scheme to artificially inflate and fix prices on certain generic drugs. These drugs were supplied to Medicare, Medicaid and the Department of Defense’s TRICARE program beneficiaries, as well as the Department of Veterans Affairs. 

Separately, Heritage entered into a three-year deferred prosecution agreement on a criminal antitrust charge that the company conspired to suppress and eliminate competition by allocating customers, rigging bids, and fixing and maintaining prices in violation of the Sherman Act. This settlement includes a $250,000 penalty. 

Heritage said its settlement fully resolves the company’s potential exposure in connection with the DOJ’s ongoing investigation into the generics pharmaceutical industry.

“Consumers have the right to generic drugs sold at prices set by competition, not collusion,” Assistant Attorney General Makan Delrahim said in a statement. “Heritage and its co-conspirators cheated and exploited American patients to pad their bottom line. Today’s resolution — requiring an admission of guilt, a criminal penalty, and cooperation in the ongoing investigation — sends a clear message to generic pharmaceutical companies and their executives that this conduct will not be tolerated. 

The resolution involved two former executives from Heritage Pharmaceuticals, Jeffery Glazer and Jason Malek, both of whom pleaded guilty in January 2017 to felony antitrust charges; they are now awaiting sentencing.

Glazer and Malek also entered into settlement and cooperation agreements with 41 states and territories that are also investigating what they allege is widespread anticompetitive activity in the generic drug industry.

Heritage’s Board of Directors terminated both executives in August 2016 after learning of their antitrust conduct and have filed a complaint against both individuals in the United States District Court for the District of New Jersey to recover these losses. 

“We are pleased to put these issues behind us and focus on Heritage’s future,” said William Marth, global president & CEO of the Heritage Group, North America and Europe, said. “In the years since the conduct occurred, Heritage has revamped its leadership team, strengthened its operations, and built a robust pipeline of future products that will expand the availability of generic pharmaceuticals for consumers. Heritage looks forward to the opportunity to better serve its customers and to compete vigorously for their business.” 

In addition to the Department of Justice, Connecticut and 45 other states sued Heritage in 2016 along with 17 other corporate defendants and two individual defendants alleging a broad, industry-wide conspiracy to restrain competition and raise prices on 15 generic drugs.

Connecticut and 43 other states filed a second lawsuit against Teva Pharmaceuticals and more than a dozen of the nation’s largest generic drug manufacturers of a broad conspiracy to artificially inflate and manipulate prices, reduce competition and unreasonably restrain trade for more than 100 different generic drugs.

The partially redacted complaint filed May 10 in Connecticut alleges that “Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the United States.”

“At the zenith of this collusive activity involving Teva, during a 19-month period beginning in July 2013 and continuing through January 2015, Teva significantly raised prices on approximately 112 different generic drugs,” the complaint states.” Of those 112 different drugs, Teva colluded with its “High Quality” competitors on at least 86 of them (the others were largely in markets where Teva was exclusive). The size of the price increases varied, but a number of them were well over 1,000%.” (Parentheses in original.)

The lawsuit focuses on Teva, but says the alleged conduct is “pervasive and industrywide.” 

Teva has denied the allegations. 

“Teva continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability,” the company said in a statement.

The complaint alleges that Teva, Sandoz, Mylan, Pfizer and other generic drug manufacturers engaged in a broad, coordinated and systematic campaign to conspire with each other to fix prices, allocate markets and rig bids for more than 100 different generic drugs.

The drugs span all types – tablets, capsules, suspensions, creams, gels and ointments – and classes, including statins, ace inhibitors, beta blockers, antibiotics, anti-depressants, contraceptives, and non-steroidal anti-inflammatory drugs. They treat a range of diseases and conditions from basic infections to diabetes, cancer, epilepsy, multiple sclerosis, HIV, ADHD and more.

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