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Generic-Drug Companies to Face First Charges in U.S. Probe

Updated on
  • Antitrust prosecutors near indictments in price-fixing case
  • Mylan headquarters searched by law enforcement in 2016

Trump vs. Big Pharma: Can He Bring Drug Prices Down?

U.S. prosecutors are nearing their first charges against companies in an almost four-year-old criminal investigation into alleged price-fixing by generic-drug makers, according to people familiar with the matter.

At least two companies are on track to be indicted in the coming months, in addition to several executives, said two people, who spoke on condition of anonymity because the investigation is confidential. Another company could agree to plead guilty before then, said one the people.

The charges, which the people said could be filed as soon as the summer, would mark a major breakthrough in an investigation that began in 2014 and has spread to nearly every major generic-drug manufacturer, including Mylan NV and Teva Pharmaceutical Industries Ltd.

Started during the Obama administration, the investigation is advancing under President Donald Trump, who has repeatedly vowed to bring down soaring drug costs in the wake of controversial price hikes by Mylan and Valeant Pharmaceuticals International Inc. A group of administration officials is working on a plan expected to be unveiled in the coming weeks.

Perrigo, Mylan Raids

Federal authorities have raided at least two companies in the investigation. Perrigo Co. disclosed its offices were searched last year. Mylan’s Pennsylvania headquarters was also raided by the FBI in the fall of 2016, according to another person familiar with the matter. The raid took place while Mylan Chief Executive Officer Heather Bresch was in Washington to testify before Congress on drug prices, the person said. Bresch, who was grilled by lawmakers about the $600 price tag for a two-pack of EpiPen among other questions, is the daughter of Senator Joe Manchin, a West Virginia Democrat.

Neither Mylan nor its executives have been publicly charged with a crime. Mylan previously disclosed subpoenas related to some of its generic drugs and search warrants related to the investigation, without saying where any raids took place.

Mylan shares fell 1.5 percent on the news and closed down 1.3 percent at $40.25 in New York. Perrigo shares fell 1.7 percent to $80.49 while shares of Petach Tikva, Israel-based Teva, which trade in the U.S. as American Depositary Receipts, fell 1.6 percent to $17.56.

Rajiv Malik, Mylan’s president, has been named as a defendant in a civil complaint by states, which allege that he took an active role in the price-fixing conspiracy. Mylan said at the time that it stood by Malik, and a lawyer for Malik said the executive denied the allegations.

A Mylan spokeswoman and the Justice Department declined to comment. Representatives for Teva and Perrigo didn’t immediately respond to requests for comment.

Guilty Pleas

The Justice Department hasn’t announced any developments in the case and no charges have been disclosed against any companies or individuals since two former executives of Heritage Pharmaceuticals Inc. were charged with colluding with other companies in December 2016 and pleaded guilty.

In that case, the former CEO and the former president of Heritage conspired to fix prices and divide customers for an antibiotic, doxycycline hyclate, and for glyburide, a medicine used to treat diabetes, according to the Justice Department.

Prosecutors have faced some challenges that have delayed their progress in the investigation, according to three people familiar with the matter, though it’s not unusual for complex investigations to stretch over many years. The drug companies under scrutiny, which are seasoned litigators over patents and other matters, are digging in against the government’s case, according to the people.

The looming charges involve fixing prices and dividing up the market, according to one of the people. Although indictments are expected, the companies or their executives could agree to plead guilty rather than fight the charges, said the other person. The identities of the companies set to be charged couldn’t be learned.

In addition to the criminal case, generic-drug manufacturers also are facing a civil complaint filed by state attorneys general led by Connecticut. That case accuses more than a dozen companies of conspiring to raise prices on 15 drugs.

— With assistance by Cynthia Koons, and Jared S Hopkins

(Updates with Perrigo and Teva shares in seventh paragraph. An earlier version of this report corrected the timing of the raid on Mylan.)
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