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DOJ and State AG Investigations Into Generic Pricing Lead to Suits Against Manufacturers and Employees

As we have previously reported, (click, here, here, here, and here to read more), generic drug manufacturers have recently come under intense scrutiny from state and federal regulators for their price hikes.  Last week, the Department of Justice and twenty state attorneys general instituted criminal and civil proceedings in connection with alleged generic drug price manipulation.

On December 14, 2016 the DOJ Antitrust Division unsealed two Informations that charged two former executives of Heritage Pharmaceuticals Inc. (“Heritage”) with felonies.  The Government alleges that the executives conspired to fix prices, rig bids, and allocate customers for two drugs: (1) doxycycline hyclate (an antibiotic) and (2) glyburide (a medicine used to treat diabetes).  The Government asserts that the executives conspired with other individuals and corporations that are not identified in the Informations.  Bloomberg reports that the executives are preparing to plead guilty to the charges at a January 9 hearing and have agreed to cooperate with federal prosecutors. 

We did not have to wait long to learn the identities of at least some of the executives’ unnamed conspirators.  On December 15, 2016, twenty State AGs launched their own civil proceedings, alleging that six generic manufacturers violated federal antitrust laws.  The State AGs also suggest that criminal suits will follow, referring to the instant lawsuit as an “initial civil action.” According to the State AGs, the generic manufacturers manipulated the prices for generic drugs by, among other things, bid rigging and price fixing.  The drugs at issue in this proceeding are the same as those in the DOJ’s proceeding: doxycycline and glyburide.  Moreover, the State AGs allege that Heritage was “the principal architect and ringleader of the conspiracies.”

For its part, Heritage claims that it was also a victim of its executives’ misconduct.  Media outlets have reported that Heritage issued a statement noting that it had filed its own lawsuit against the executives.  On November 10, 2016, Heritage filed a 130-page complaint, claiming that the executives had looted tens of millions of dollars from the company. Heritage’s pleading included claims for violations of state and federal RICO laws as well as the misappropriation of trade secrets.  Heritage also filed a preliminary injunction application with the Court, seeking the return of its Abbreviated New Drug Applications from the executives.  While the Court recently granted the Government’s motion to intervene in the case, the Court has not yet granted the Government’s motion to stay the proceedings.

We will report back with further developments.