This story has been updated.
The Justice Department filed the first charges in an ongoing investigation of price fixing in the generic drug industry on Wednesday. Two former executives of a Eatontown, N.J.-based Heritage Pharmaceuticals were charged Wednesday with conspiracy to collude on prices for an antibiotic and a diabetes medication.
On Thursday, 20 states filed an antitrust lawsuit against Heritage and five additional generic drug companies, accusing the companies of conspiring to manipulate prices and agree not to compete against one another for the same two drugs. The other companies are Mylan Pharmaceuticals, Teva Pharmaceuticals USA, Aurobindo Pharma, Citron Pharma and Mayne Pharma.
Heritage released a statement saying the former executives had been fired in August and noted that the company is cooperating with the Justice Department's investigation. Nina Devlin, a spokeswoman for Mylan, said that the company knows of "no evidence that Mylan participated in price fixing." Denise Bradley, a spokeswoman for Teva, said the company has "not found evidence that would give rise to any civil or criminal liability." A receptionist at Aurobindo's U.S. headquarters said the company had no comment. Messages to the other companies were not immediately returned.
The Justice Department does not name Heritage, but it alleges that Jeffrey Glazer and Jason Malek — who were Heritage executives at the time — were involved in meetings, conversations or communications with unspecified co-conspirators to discuss the sale of doxycycline hyclate, an antibiotic, and glyburide, a diabetes medication. According to court documents filed in federal district court in Pennsylvania, Malek and Glazer, who was then the chief executive, agreed not to compete with those co-conspirators and sold both drugs at “collusive and noncompetitive prices.”
They were charged via a court document called “a criminal information,” which is often an indication they have agreed to plead guilty in the case.
“By entering into unlawful agreements to fix prices and allocate customers, these two executives sought to enrich themselves at the expense of sick and vulnerable individuals who rely upon access to generic pharmaceuticals as a more affordable alternative to brand-name medicines,” Deputy Assistant Attorney General Brent Snyder of the Justice Department’s antitrust division said in a news release.
Michael Himmel, an attorney for Malek, declined to comment on the charges. An attorney for Glazer did not immediately respond to messages.
The court documents only refer to the alleged co-conspirators as “various corporations and individuals.”
Bloomberg has reported that the investigation spans more than two dozen drugs and about a dozen companies, but the Justice Department has not specified whether there will be more charges. A number of companies have reported receiving subpoenas regarding generic-drug pricing, including Mylan, Teva Pharmaceutical Industries and Taro Pharmaceuticals.
At the same time, Heritage is suing the former executives in New Jersey district court for allegedly orchestrating “a long-running criminal conspiracy that severely damaged Heritage Pharmaceuticals.”
According to Heritage's complaint, filed in November, both executives were fired in August. They allegedly set up a dummy corporation, embezzled intellectual property and “looted” millions of dollars from Heritage.
“In August 2016, following an internal investigation that revealed a variety of serious misconduct by the individuals charged today, Heritage Pharmaceuticals terminated them,” the company said in a statement. “We are fully cooperating with all aspects of the Department of Justice’s continuing investigation. Recently Heritage initiated its own legal action against these same individuals to seek redress for an elaborate embezzlement and self-dealing scheme. We are deeply disappointed by the misconduct and are committed to ensuring it does not happen again.”
“Pharmaceutical executives must be held accountable for ripping off the American people by charging them the highest prices in the world for prescription drugs,” Sen. Bernie Sanders (I-Vt.) said in a statement. “At a time when one out of five Americans cannot afford the medication they need, we must do everything we can to end the greed and illegal behavior of the drugmakers. Fraud can no longer be an acceptable business model for the pharmaceutical industry.”
Clarification: A previous version of this story referred to a letter Sen. Bernie Sanders (I-Vt.) and Rep. Elijah E. Cummings (D-Md.) sent to Heritage Pharmaceuticals about the pricing of a form of doxycycline hyclate. However, the company did not sell that version of the drug.
More from Wonkblog: