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Analysis

Sandoz Will Pay $195M to Settle Price Fixing Charges

By John Commins  
   March 03, 2020

It's the seventh such settlement reached by DOJ's Antitrust Division in its ongoing probe of the generic pharmaceutical industry. 

Generic drug maker Sandoz Inc. will pay the federal government $195 million to avoid felony charges for price fixing, bid rigging, and customer allocation under a deferred prosecution agreement announced this week by the Department of Justice.  

The DPA is the seventh such settlement reached by DOJ's Antitrust Division in its ongoing probe of the generic pharmaceutical industry. Sandoz is the third company to be charged and entered into a DPA.

Three executives have pleaded guilty, including former Sandoz executive Hector Armando Kellum. Ara Aprahamian, a former executive at Taro Pharmaceutical USA, was indicted last month on price fixing charges and is awaiting trial. 

DOJ accused Sandoz of participating in four criminal antitrust conspiracies, each with a competing generic drug maker, between 2013 and 2015.

Under the DPA, Sandoz admitted that its sales from the various schemes exceeded $500 million. The company has agreed to cooperate with federal prosecutors in the ongoing conspiracy. 

"Today’s resolution, with one of the largest manufacturers of generic drugs, is a significant step toward ensuring that prices for generic drugs are set by competition, not collusion, and rooting out antitrust crimes that cheated American purchasers of vital medicines," Assistant Attorney General Makan Delrahim of DOJ's Antitrust Division said in a media release.

"Sandoz conspired for years with other manufacturers and their executives to raise prices for critical medications, and the Antitrust Division will continue its ongoing investigation to hold both individuals and corporations accountable for these crimes," Delrahim said.  

Sandoz has also set aside $185 million while it negotiates a separate settlement with DOJ's Civil Division to resolve related claims.

"We take seriously our compliance with antitrust laws," Sandoz President Carol Lynch said.

"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," she said. "We are disappointed that this misconduct occurred in the face of our clear antitrust compliance policies and multiple trainings – and in full contravention of the company’s values."

Specifically, Sandoz admitted to the following four felony charges:

  • Count One charged Sandoz for conspiring with Taro Pharmaceuticals USA to fix prices for drugs that included clobetasol (cream, emollient cream, gel, ointment, and solution), desonide ointment, and nystatin triamcinolone cream.
     
  • Count Two charged Sandoz for conspiring with Kavod Pharmaceuticals LLC to allocate customers and fix prices of benazepril HCTZ.  Kavod was charged and entered into a DPA last year for its participation. 
     
  • Count Three charged Sandoz for conspiring with a generic drug company based in Michigan for drugs that included desonide ointment.
     
  • Count Four charged Sandoz for conspiring with a generic drug company based in Pennsylvania for drugs that included tobramycin inhalation solution. 

By accepting the DPA, Sandoz avoided minimum fines of $100 million for each count, which could have been increased to twice the gain derived from the crime or twice the loss suffered by victims if either amount is greater than $100 million. 

“We are disappointed that this misconduct occurred in the face of our clear antitrust compliance policies and multiple trainings – and in full contravention of the company’s values.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Photo credit: Mark Van Scyoc / Shutterstock.com


KEY TAKEAWAYS

DOJ accused Sandoz of participating in four criminal antitrust conspiracies, each with a competing generic drug maker, between 2013 and 2015.

Under the DPA, Sandoz admitted that its sales from the various schemes exceeded $500 million.

The company has agreed to cooperate with federal prosecutors in the ongoing conspiracy.

Sandoz has also set aside $185 million while it negotiates a separate settlement with DOJ's Civil Division to resolve related claims.


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