(This is a cross-post from Steptoe’s new Investigations and Enforcement Blog.)
The Department of Justice Antitrust Division’s investigation into price-fixing by generic drug companies continues to remain one of the Antitrust Division’s most active matters. This week the Antitrust Division announced that it had indicted Teva Pharmaceuticals USA Inc. (Teva), the seventh company to reach a resolution with the Antitrust Division in this investigation. Teva is one of the largest pharmaceutical companies in the world.
Teva Pharmaceuticals was charged for its role in three separate conspiracies to fix prices for generic drugs. Specifically, it alleges that Teva, in three separate conspiracies, engaged in the sharing with competitors of pricing information for certain generic drugs in advance of price increase announcements. The first alleged conspiracy involved pravastatin, which is a cholesterol medicine, and other generic drugs; the second alleged conspiracy involved drugs used to treat and manage arthritis, seizures, pain, skin conditions, and blood clots; and the third alleged conspiracy involved drugs used to treat brain cancer, cystic fibrosis, arthritis, and hypertension. The Antitrust Division alleges that the conspiracies lasted for a little over two years and began as early as May 2013 and lasted until around December 2015. The estimated amount of gain/loss for each conspiracy is $200 million, $75 million, and $75 million, respectively.
Six companies were previously charged in the generic drug investigation. Five of these companies entered into deferred prosecution agreements – a resolution that has begun being used recently by the Antitrust Division following new compliance guidance issued by the Antitrust Division last year. Most recently, in July, the Antitrust Division reached a deferred prosecution agreement with Taro Pharmaceuticals U.S.A. Inc. The generic drug investigation has yielded large penalties for the Antitrust Division with Taro Pharmaceuticals agreeing to pay a $205.7 million criminal penalty to settle the charges. Taro also reached an understanding with the DOJ’s Civil Division to pay $213.3 million to resolve claims related to federal health care programs. The sixth company, Glenmark, is a co-defendant with Teva (Teva was added in a second superseding indictment — the original indictment only named Glenmark), and is alleged to have been a co-conspirator in the first conspiracy alleged against Teva.
Teva’s indictment comes after the company ended its settlement discussions with the Antitrust Division earlier this summer likely betting that the DOJ would not pursue charges against a drug company during a global pandemic. Among other drugs, Teva manufactures hydroxychloroquine, one of the drugs that has been used to treat COVID-19 patients. Like Glenmark, Teva took a large gamble by not reaching a deferred prosecution agreement with the government because if Teva were to be found guilty at trial or to plead guilty prior to verdict, Teva could be excluded from eligibility to participate in Medicare programs which would be a serious, and potentially fatal, penalty for a drug manufacturer. This consequence was likely one of the driving forces that led to five other drug manufacturers reaching deferred prosecution agreements with the Antitrust Division.
The potential consequences for the drug companies’ fighting price-fixing charges extend beyond the criminal cases. The generic drug manufacturers also face civil litigation from state attorneys general and private plaintiffs, and will arguably not enjoy the benefit of the damages limitations conferred to cooperators under ACPERA.
We will continue to monitor this litigation as it progresses, including what we anticipate will be extensive pre-trial motion practice covering potential grounds for dismissal, severance/Kotteakos issues, and discovery disputes over documents from the internal investigations conducted by the outside law firms of the uncharged co-conspirator companies.