Generic Drug Maker Heritage Pharmaceuticals Admits to Price Fixing

The Eatontown, New Jersey-based company will pay $7.1 million to resolve criminal and civil allegations, and will cooperate with an ongoing federal investigation of price fixing in the generic drug industry.

Generic drug maker Heritage Pharmaceuticals Inc. will pay more than $7 million to resolve criminal and civil allegations related to a price-fixing scheme with competitors, the Department of Justice said.

The Eatontown, New Jersey-based drug company has also agreed to cooperate with an ongoing federal investigation of alleged price fixing in the generic drug industry, DOJ said.  

"American consumers have the right to generic drugs sold at prices set by competition, not collusion," Assistant Attorney General Makan Delrahim of DOJ's Antitrust Division said in prepared remarks.

"It is particularly galling that, when healthcare prices in the United States are already high, certain generic pharmaceutical companies and executives engaged in collusive conduct at the expense of individuals who depend on critical medications," Delrahim said. "Heritage and its co-conspirators cheated and exploited vulnerable American patients to pad their bottom line."

A one-count felony charge filed this week in federal court in Philadelphia alleges that in 2014 and 2015 Heritage took part "in a criminal antitrust conspiracy with other companies and individuals engaged in the production and sale of generic pharmaceuticals, a purpose of which was to fix prices, rig bids, and allocate customers for glyburide, a medicine used to treat diabetes," DOJ said.

No other generic drug makers were publicly identified as part of the ongoing investigation by DOJ.

This is the third charge in the DOJ Antitrust Division's ongoing investigation of Heritage, which has already levelled charges against former CEO Jeffrey Glazer and former president Jason Malek.

The Antitrust Division also announced a deferred prosecution agreement after Heritage admitted its role in a price-fixing scheme involving the drug glyburide. Heritage will pay a $225,000 criminal penalty and cooperate with the ongoing criminal investigation.

In exchange, DOJ said it deferred prosecuting Heritage for three years, based on "substantial and ongoing cooperation with the investigation to date, including its disclosure of information regarding criminal antitrust violations involving drugs other than those identified in the criminal charge and the agreement." 

In a separate civil resolution, Heritage will pay $7.1 million to resolve price-fixing allegations that DOJ said occurred between 2012 and 2015. The collusion between the drug makers and the ultimate sale of these drugs to federal healthcare programs at inflated prices are violation of the Anti-Kickback Statute and the False Claims Act, DOJ said.  

The drugs included hydralazine, used to treat high blood pressure, theophylline, used to treat asthma and other respiratory problems, and glyburide, DOJ said. 

Heritage Blames Former Execs

In a media release, Heritage placed the blame for the misconduct on the shoulders of its former executives, "both of whom pleaded guilty in January 2017 to felony antitrust charges; they are now awaiting sentencing, which is currently scheduled for September 26, 2019."

"The company's board of directors terminated both executives in August 2016 after learning of their antitrust conduct and discovering they orchestrated a years-long embezzlement scheme that looted tens of millions of dollars from the Company," Heritage said, adding that the company has filed a complaint in federal court hoping against both men, hoping to recover their losses.      

William S. Marth, president and CEO of the Heritage Group, North America and Europe, said the drug maker was "pleased to put these issues behind us and focus on Heritage's future."

"In the years since the conduct occurred, Heritage has revamped its leadership team, strengthened its operations, and built a robust pipeline of future products that will expand the availability of generic pharmaceuticals for consumers," Marth said.