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Generic Drug Price Hike Investigations Target Lannett

Since we last reported on state and federal investigations into recent generic drug price increases, the investigations have moved forward against Philadelphia-based Lannett Co. On November 20, a Senate healthcare subcommittee convened a hearing to address why the prices of certain generic drugs had skyrocketed. The CEOs of three drug manufacturers, including Lannett, were invited to testify. They declined to do so. In their absence, U.S. Representative Elijah Cummings (D-Md.) criticized the generic drug manufacturers’ claim that they were re-investing 100% of their “massive” profits into product improvement and new medicines. Congressman Cummings called this assertion “dubious” given that the manufacturers had refused to provide any documents or testimony to support this claim.

We previously reported that the U.S. Department of Justice had issued a grand jury subpoena to an executive at Lannett. On December 5, 2014, Lannett disclosed in its 8-K that the company had been served with a federal grand jury subpoena related to the continuing investigation of the generic pharmaceutical industry into possible violations of the Sherman Act. The subpoena requested documents similar to those sought by the prior subpoena, including communications or correspondence with competitors regarding the sale of generic prescription medications. Because the DOJ issued a grand jury subpoena to a Lannett executive followed by a grand jury subpoena to the company, the first subpoena may have revealed documents that the DOJ believed warranted further investigation.

We’ll continue to monitor further developments.