In record-setting settlement, Novartis’ Sandoz unit admits guilt in conspiracy to fix prices
Becoming the largest drugmaker to plead guilty in a wide-ranging Justice Department generics probe, Novartis admitted to price-fixing charges and agreed to a record-setting settlement.
Novartis’s generics unit, Sandoz, has agreed to pay $195 million to settle criminal charges that from mid-2013 through mid-2015 it conspired with competitors to artificially inflate drug prices on critical medicines. The company admitted guilt and said the conspiracy affected over $500 million in sales. The fine is the largest ever paid out in a domestic antitrust agency, the Justice Department said.
Sandoz is now the third and largest pharmaceutical company to admit guilt in a federal probe that began in 2014 and has swept up the giants of generics, including Mylan and Teva Pharmaceuticals. The drugs affected included those for cystic fibrosis, arthritis and blood pressure, according to the Justice Department.
Heritage Pharmaceuticals and Rising Pharmaceuticals resolved their cases with similar agreements.
“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,” US Justice Department antitrust attorney Makan Delrahim said in a statement.
The settlement comes a month after former Sandoz executive Hector Armando Kellum pleaded guilty to a price-fixing charge. Novartis said the executives implicated in the case are no longer employed at the company and that as part of the agreement, they will continue to cooperate with the government’s investigation and work to enhance their compliance protocols.
“We take seriously our compliance with antitrust laws, and 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,” Sandoz president Carol Lynch said in a statement. “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.”
The resolution comes amid the latest of several bad headlines for Novartis. Last week, after the American Society of Retina Specialists issued a warning to its members that the Swiss company’s new eye medicine Beovu could cause dangerous inflammation, a lawsuit came to light in which a Novartis employee claimed she was fired for raising those safety concerns when the drug was in development. That followed a data integrity scandal at their gene therapy subsidiary AveXis and questions about the company’s one-year contract with Donald Trump’s former attorney Michael Cohen.
Today’s settlement is what’s known as a deferred prosecution agreement. These agreements have become popular with prosecutors in their pursuit of generics, because they allow companies to continue operations, ensuring patients don’t see a shortage in drugs or a change in price.
Sandoz, whose $10 billion in annual sales account for nearly one fifth of Novartis’ revenue, is the first high-profile generics maker to settle with the Justice Department. Generics makers have faced increasing scrutiny from the Justice Department and states attorney general in recent years, as prices have fallen and tightened margins for even the most successful companies.