Novartis’ Sandoz Settles U.S. Drug Price-Fixing Charges
Novartis’ Sandoz Settles U.S. Drug Price-Fixing Charges
(Bloomberg) -- Novartis AG’s Sandoz unit agreed to pay $195 million to settle U.S. criminal charges that it conspired with other pharmaceutical companies to fix prices of generic drugs, the most significant settlement to come from a long-running Justice Department investigation.
Sandoz conspired with four of its competitors between 2013 and 2015 to rig drug prices, the Justice Department said Monday. The settlement marks the largest penalty obtained by the U.S. in a domestic cartel case, the government said. Sandoz agreed to cooperate with the antitrust division’s continuing investigation.
Sandoz admitted that the sales affected by the conspiracies exceeded $500 million and involved drugs for common skin conditions, high blood pressure and cystic fibrosis, according to the Justice Department.
“Today’s resolution, with one of the largest manufacturers of generic drugs, is a significant step toward ensuring that prices of generic drugs are set by competition, not collusion,” said the Justice Department’s antitrust chief, Makan Delrahim, in a statement.
Novartis said that Sandoz had cooperated with the government’s investigation, and individuals implicated in the underlying contact are no longer employed at the company. Sandoz will also work to enhance its compliance program, employee training and monitoring as a part of the three-year deferred-prosecution agreement.
“We take seriously our compliance with antitrust laws, and in reaching today’s resolution, we are not only resolving historical issues but also underscoring our commitment to continually improving our compliance and training programs and evolving our controls,” Sandoz President Carol Lynch said in a statement.
Sandoz said it’s also in settlement negotiations with the civil division of the Justice Department to resolve potential related claims and is setting aside $185 million for that case. Sandoz is facing a civil lawsuit filed by state attorneys general led by Connecticut.
Sandoz, which accounts for one-fifth, or nearly $10 billion, of Swiss drug giant Novartis’s annual revenue, is the largest and best-known company to reach a resolution of U.S. price-fixing allegations so far. The government has reached settlements with two small generic drugmakers and charged four executives.
The agreement helps resolve a cloud that has hung over Sandoz after becoming the subject of state and federal investigations that began in 2014 into price-fixing allegations by generic-drug companies. The probes have targeted the biggest names in the industry, including Mylan NV and Teva Pharmaceutical Industries Ltd.
The generics industry has been navigating years of increasingly thin profit margins on copycat medicines in the U.S., which has weighed on their businesses. Nine in 10 prescription drugs dispensed in the U.S. are generics. Lawmakers have alleged that illegal generic pricing coordination over the years has cost federal health programs billions of dollars.
The pact is a sign that prosecutors are continuing to press forward with a sprawling investigation that at times has encountered substantial roadblocks in securing the cooperation of witnesses, among other obstacles. Last year, Bloomberg News reported that a number of drugmakers have talked to the Justice Department about resolving the probe.
The accord, known as a deferred-prosecution agreement, will stay in effect for three years and comes after a former Sandoz executive, Hector Armando Kellum, pleaded guilty in February to a price-fixing charge and agreed to cooperate with the Justice Department’s investigation. At least two other Sandoz executives are also cooperating with the government, according to court papers.
Prosecutors said Kellum conspired with Ara Aprahamian, a former marketing executive at Taro Pharmaceutical Industries Ltd., now a unit within Indian generics giant Sun Pharmaceutical Industries, to fix prices for medications and allocate customers.
According to the government, executives at the two firms discussed which customers each company would solicit for new drugs, rather than compete against one another for business. And when Taro planned to or had raised prices, Aprahamian would encourage Sandoz to follow suit, which it usually did, according to prosecutors. Aprahamian was indicted in February.
Representatives for Sun Pharma didn’t immediately respond to requests for comment.
In the settlement with Sandoz, the Justice Department said the drug maker conspired with Rising Pharmaceuticals Inc., now known as Kavod Pharmaceuticals, which settled U.S. charges in December, as well as unnamed companies based in New York, Michigan and Pennsylvania.
--With assistance from Emma Court.
To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Riley Griffin in New York at rgriffin42@bloomberg.net
To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Timothy Annett
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