Recently, it was announced that Heritage Pharmaceuticals, Inc., a generic pharmaceutical company, was charged with conspiring with its competitors to fix prices, rig bids, and allocate customers. According to the one-count felony charge, from roughly April 2014 through at least December 2015, Heritage was a participant in a criminal antitrust conspiracy with other generic companies for glyburide, a medication used to treat diabetes.
At the same time the filing of the charge was announced, the Antitrust Division of the Department of Justice (DOJ) announced a deferred prosecution agreement (DPA). While the DPA is not finalized until accepted by the court, in it, Heritage admits that it conspired to fix prices, rig bids, and allocate customers for glyburide. Under the terms of the DPA, Heritage will pay a $225,000 criminal penalty and cooperate fully with the ongoing criminal investigation. The United States will defer prosecuting Heritage for a period of three years to allow the company to comply with the agreement’s terms.
Any conviction (including a guilty plea) would likely result in the Office of the Inspector General of the Department of Health and Human Services imposing mandatory exclusion of Heritage from all federal health care programs for a period of at least five years. The agreement is an attempt to ensure that integrity has been restored to Heritage’s operations and allows the company to preserve its financial liability while preserving the United States’ ability to prosecute it should material breaches occur.
The DPA is based on the individual facts and circumstances present in this case, including Heritage’s ongoing cooperation with the investigation to date and its disclosure of information regarding criminal antitrust violations involving drugs other than those identified in the criminal charge and agreement. The involvement by Heritage has allowed the United States to advance other investigations into criminal antitrust conspiracies among other generic pharmaceutical manufacturers.
“We are pleased to put these issues behind us and focus on Heritage’s future,” stated William S. Marth, Global President & CEO of the Heritage Group, North America and Europe. “In the years since the conduct occurred, Heritage has revamped its leadership team, strengthened its operations, and built a robust pipeline of future products that will expand the availability of generic pharmaceuticals for consumers. Heritage looks forward to the opportunity to better serve its customers and to compete vigorously for their business.”
The DPA is important for two reasons – one, it confirms to the industry and the public that the ongoing criminal investigation extends beyond Heritage and glyburide to encompass other manufacturers and other drugs. The other important thing to note is this is the first time the Antitrust Division has agreed to a DPA for any entity other than a bank. This may mean a new trend for the pharmaceutical industry.
Heritage’s former CEO, Jeff Glazer, and former President, Jason Malek, were previously charged with price fixing and pled guilty in 2017. They are currently awaiting sentencing.
False Claims Act Civil Resolution
In a separate civil resolution, Heritage has agreed to pay $7.1 million to resolve allegations under the False Claims Act related to the price-fixing conspiracy. The government alleged that between 2012 and 2015, Heritage paid and received remuneration through arrangements on price, supply, and allocation of customers with other pharmaceutical manufacturers for certain generic drugs in violation of the Anti-Kickback Statute, and that its sale of such drugs resulted in claims submitted to or purchases by federal healthcare programs. The drugs allegedly implicated in this scheme address a wide variety of health conditions, and include hydralazine, used to treat high blood pressure, theophylline, used to treat asthma and other respiratory problems, and glyburide.