Apotex Execs Avoid Criminal Charges Under DOJ Deferred Prosecution Agreement
Executive Summary
While former Sandoz and Heritage execs were charged in the government's generic price-fixing probe, Apotex and its employees will apparently escape such fate if they abide by the terms of DOJ agreement; company admits to fixing price of pravastatin and agrees to pay $24.1m criminal penalty.
Apotex Inc. freed both itself and its employees from the US Department of Justice's probe of the generics industry under a three-year deferred prosecution agreement to resolve the DOJ's charge that it fixed the price of the cholesterol medication pravastatin.
Under the agreement, announced on 7 May, Apotex admitted that it conspired with other generic drug sellers to artificially raise the price of the drug and agreed to pay a $24.1m criminal penalty.
Apotex is the fourth company to be charged in the DOJ's industrywide investigation. Heritage Pharmaceuticals Inc., Rising Pharmaceuticals Inc., and Sandoz Inc. also entered into deferred prosecution agreements to resolve charges against them. The DOJ has also charged four individuals, two former Heritage executives, a former Taro Pharmaceuticals USA Inc. executive, and a former Sandoz executive. Three of them have entered guilty pleas, and the fourth is awaiting trial.
Apotex has apparently avoided having its employees face individual charges if the company abides by the terms of the deferred prosecution agreement. The DPA states that the government will not bring criminal charges against Apotex or any "covered individual" for any act or offense committed before the signing of the agreement, provided that at the time of the conduct the covered individual was employed at Apotex and was acting within the scope of his or her responsibilities.
Sandoz entered into a similar deferred prosecution agreement with the DOJ in March, agreeing to pay a $195m criminal penalty and admitting to conspiring with other generic firms to allocate customers and fix prices for several drugs. (Also see "Sandoz Deal In Price-Fixing Case Is Largest Ever For Domestic Antitrust Case" - Pink Sheet, 2 Mar, 2020.)
The DOJ's DPA with Sandoz also specified that the government would not bring criminal charges against any covered individual for any act or offense committed before the agreement was signed, provided that the individual was employed by Sandoz at the time of the conduct. However, prior to the DPA, a former Sandoz exec pled guilty to conspiracy to fix prices, rig bids and allocate customers for generic drugs. (Also see "Former Sandoz Executive Kellum Admits US Price-Fixing" - Generics Bulletin, 17 Feb, 2020.)
Apotex Is Improving Compliance And Training Programs
The government filed a one-count felony charge against Apotex on 7 May in the US District Court for the Eastern District of Pennsylvania. The DPA says the company conspired through certain of its current and/or former employees with other persons and entities engaged in selling generic drugs "to suppress and eliminate competition by agreeing to increase and maintain prices of pravastatin sold in the United States, from in or about May 2013 and continuing through at least December 2015."
In a Q&A document about the deferred prosecution agreement, the DOJ said Apotex's relevant sales of pravastatin totaled at least $105m. The company will be turning over about a quarter of that sum in the criminal penalty.
The DOJ said that as part of the agreement, the parties will file a joint motion, which is subject to approval by the court, to defer for the term of the DPA any prosecution and trial of the charges filed against Apotex. The DOJ will not continue the criminal prosecution of Apotex once the agreement expires if the company fully complies with its obligations.
Apotex said that subject to the conditions set forth in the DPA, it believes this fully resolves the matter with respect to Apotex.
"Compliance is something we take very seriously, including our compliance with antitrust laws. This activity, occurring several years ago, was clearly against our established compliance policies, training and culture," Apotex VP, General Counsel-US Roberta Loomar said in a statement. "With this resolution, we are highlighting our commitment to continually improve our compliance and training programs, as well as evolve our controls to ensure full compliance with antitrust laws."
Cooperation Is Crucial
Like other companies subject to DPAs, Apotex areed to cooperate with the DOJ's ongoing investigation of the generic industry. The DOJ said this includes "using its best efforts to secure the cooperation of its current officers, directors and employees."
The DOJ said that in deciding to resolve the charge against Apotex with a DPA, its antitrust division considered the likelihood that a criminal conviction would result in Apotex's mandatory exclusion from all federal healthcare programs for at least five years and the collateral consequences that would result from the exclusion. The division also weighed Apotex's cooperation.
The DOJ began its probe of the generics industry in 2014 following reports of dramatic increases in generic drug prices. Two former Heritage executives were the first to be charged by the DOJ in December 2016. (Also see "Generic Price Fixing Probe: First Charges Unsealed, More May Come Before Inauguration Day" - Pink Sheet, 14 Dec, 2016.)
The investigation is running in parallel with investigations by state attorneys general who have filed two complaints, the most recent against 20 generic manufacturers and 15 senior executives. Those complaints have been consolidated with other civil actions in multidistrict litigation in the Eastern District of Pennsylvania. (Also see "Generic Price Fixing Litigation Presses On With 'Overarching Conspiracy' Claims Intact" - Pink Sheet, 3 Sep, 2019.)