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Heritage Pharmaceuticals Admits to Generic Drug Price Fixing Scheme

In the latest development in the Department of Justice (DOJ) Antitrust Division’s ongoing investigation into the generic pharmaceutical industry, Heritage Pharmaceuticals, Inc. has entered into a deferred prosecution agreement (DPA) with DOJ.  The terms of the DPA require Heritage to pay a $225,000 criminal penalty and provide full cooperation with the ongoing investigation.  The one-count felony charge, filed in the Eastern District of Pennsylvania on May 30, alleges that Heritage violated Section 1 of the Sherman Act by conspiring with multiple unnamed parties to divide up the domestic market and fix prices for glyburide, a diabetes medication, from April 2014 through December 2015.  According to DOJ, the DPA provides that the United States will not prosecute Heritage for three years.

DOJ cited a number of factors supporting its decision to enter into the DPA, notably that Heritage has provided substantial and ongoing cooperation with DOJ’s investigation of generics.  That cooperation has included Heritage providing information about generic drug pricing criminal antitrust violations beyond those identified in the DPA.  Heritage also agreed to resolve all related civil charges stemming from the alleged anti-competitive behavior.

Concurrently, Heritage has agreed to pay $7.1 million as part of a settlement with DOJ’s Civil Division to resolve allegations of False Claims Act (FCA) violations with respect to collusive drug pricing activity.  The FCA allegations arose from Heritage’s payment and receipt of remuneration through anticompetitive arrangements with other generic manufacturers on price, supply, and allocation of customers for multiple drugs (including hydralazine, theophylline, and glyburide) from 2012 to 2015.  As alleged, Heritage then sold these drugs at the artificially inflated prices, which resulted in claims submitted to or purchases by federal healthcare programs. 

The May 30th charge is not Heritage’s first brush with DOJ’s generic price-fixing investigation. Two former Heritage executives were charged in 2016 with price-fixing, bid-rigging, and customer allocation conspiracies.  Both Jeffrey Glazer (former CEO) and Jason Malek (former President) pled guilty in 2017.  Meanwhile, the issue of generic price fixing has drawn attention far beyond DOJ.  Just last month, over 40 states filed a lawsuit in Connecticut against more than two dozen pharmaceutical companies and executives, alleging broad anti-competitive behavior in the generics industry.  Given the scope and breadth of the current allegations of collusive behavior among generic manufacturers, there is certainly more to come.

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Authors

Michelle L. Caton is a Mintz attorney who focuses her practice on life sciences and health care transactions as well as a variety of health care regulatory and compliance matters.

Farrah Short

Special Counsel

Farrah Short is a Mintz Special Counsel who advises clients on antitrust and competition law, including merger review, competitor collaborations, government investigations, and private class action litigation. She specializes in counseling clients through the Hart-Scott-Rodino merger review process.