Generics price fixing charges land pharma firms $447.2m penalty

According to the US Department of Justice (DOJ), three companies—Taro Pharmaceuticals, Sandoz, and Apotex—have agreed to fork over a total of $447.2m USD to settle their alleged violations of the False Claims Act. According to the government’s allegations, the firms conspired to fix the prices of various generic drugs, resulting in higher prices paid by federal health care programs and beneficiaries.

The charges allege that between the years of 2013 and 2015, the trio of companies paid and received compensation, which is prohibited by the Anti-Kickback Statute, via arrangements on price, supply, and allocation of customers with other pharmaceutical manufacturers for certain generic drugs manufactured by the companies. The charges and penalties are broken down as follows:

• Taro has agreed to pay $213.2m USD; the company’s drugs allegedly involved include etodolac (a nonsteroidal anti-inflammatory drug used to treat pain and arthritis) and nystatin-triamcinolone cream and ointment, a combination of an antifungal medicine and steroid used to treat certain skin infections.
• Sandoz has agreed to pay $185m USD; their drugs cited in the allegations include benazepril (used to treat hypertension) and clobetasol (a corticosteroid used to treat skin conditions).
• Apotex has agreed to pay $49m USD in connection with its sale of pravastatin, a drug used to treat high cholesterol and triglyceride levels.

“Illegal collaboration on the price or supply of drugs increases costs both to federal health care programs and beneficiaries​,” said acting assistant attorney general Brian Boynton of DOJ’s Civil Division. “The department will use every tool at its disposal to prevent such conduct and to protect these taxpayer-funded programs​.”

“These civil settlements are another achievement in my office’s efforts to hold generic drug companies accountable for the consequences arising from price-fixing schemes, including the harm to federal health care programs​,” said acting US attorney Jennifer Arbittier Williams for the Eastern District of Pennsylvania. “We will continue to aggressively pursue these violations of the Anti-Kickback Statute and the False Claims Act and obtain significant recoveries​.”

“Conspiring to raise prices on generic medications is illegal and could prevent patients from being able to afford their needed prescription drugs; Americans have the right to purchase generic drugs set by fair and open competition, not collusion,​” said special agent in charge Maureen Dixon, of the Philadelphia Regional Office of the Inspector General, Department of Health and Human Services (HHS-OIG). “HHS-OIG along with our law enforcement partners will continue to investigate allegations of companies engaging in actions that put the public and the Medicare program at risk​.”  

As part of the settlement agreement, all three firms also entered a five-year corporate integrity agreement (CIA) with OIG. The CIAs include unique internal monitoring and price transparency provisions; they also require the pharma companies to implement compliance measures (such as risk assessment programs, executive recoupment provisions, and compliance-related certifications from company executives and board members.

 “These kickback schemes harm Medicare, Medicaid, and patients​,” said chief counsel Gregory Demske for the Inspector General at HHS. “The CIAs promote transparency and accountability by requiring the companies to report price-related information to OIG and mandating individual certifications by key executives involved in pricing and contracting functions​.”

The Anti-Kickback Statute prohibits companies from receiving or making payments in return for arranging the sale or purchase of items such as drugs for which payment may be made by a federal health care program.; these provisions are designed to ensure that the supply and price of health care items are not compromised by improper financial incentives. These settlements reflect the important role of the False Claims Act to ensure that the United States is fully compensated when it is the victim of kickbacks paid to further anticompetitive conduct.      

All three companies previously entered into deferred prosecution agreements with the Antitrust Division to resolve related criminal charges. Taro paid a criminal penalty of $205.6m USD and admitted to conspiring with two other generic drug companies to fix prices on certain generic drugs. Sandoz paid $195m USD and admitted to conspiring with four other generic drug companies to fix prices on certain generic drugs. Apotex paid $24.1m USD and admitted to conspiring to increase and maintain the price of pravastatin. The civil settlement payments announced today are in addition to the criminal penalties paid by the companies.