Antitrust Law Daily Sandoz to pay $195M criminal penalty to settle price fixing charges
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Monday, March 2, 2020

Sandoz to pay $195M criminal penalty to settle price fixing charges

By Peter Reap, J.D., LL.M.

The penalty agreed to by the generic drug maker under a deferred prosecution agreement is the largest ever for a domestic antitrust case, according to Justice Department.

Generic drug manufacturer Sandoz, Inc. has agreed to pay a $195 million criminal penalty to settle charges brought by the Department of Justice Antitrust Division of conspiring to allocate customers, rig bids, and fix prices for generic drugs, the agency announced today. The penalty is the largest ever for a domestic antitrust case. Sandoz is the third pharmaceutical company to admit to criminal antitrust charges in the Antitrust Division’s ongoing investigation.

The Antitrust Division filed a four-count felony indictment in the federal district court in Philadelphia, charging Sandoz with participating in four criminal antitrust conspiracies, each with a competing manufacturer of generic drugs and various individuals. The charged conspiracies took place between 2013 and 2015.

  • Count One charges Sandoz for its role in a conspiracy with an unnamed generic drug company based in New York and other individuals. Sandoz admitted that drugs affected by this conspiracy included clobetasol (cream, emollient cream, gel, ointment, and solution), desonide ointment, and nystatin triamcinolone cream.
  • Count Two charges Sandoz for its role in a conspiracy with Kavod Pharmaceuticals LLC (formerly known as Rising Pharmaceuticals) to allocate customers and fix prices of benazepril HCTZ. Rising was charged and entered into a deferred prosecution agreement in December 2019 for its participation in the same conspiracy.
  • Count Three charges Sandoz for its role in a conspiracy with a generic drug company based in Michigan. Sandoz admitted that drugs affected by this conspiracy included desonide ointment.
  • Count Four charges Sandoz for its role in a conspiracy with a generic drug company based in Pennsylvania. Sandoz admitted that drugs affected by this conspiracy included tobramycin inhalation solution.

Today’s case is the seventh to be filed in the Antitrust Division’s ongoing investigation into the generic pharmaceutical industry. Sandoz is the third company to be charged; the previous two companies also entered into deferred prosecution agreements. Four individual charges have also been filed in the investigation.

Settlement agreement. Under the deferred prosecution agreement resolving the charges, Sandoz agreed to pay a $195 million criminal penalty and admitted that its sales affected by the charged conspiracies exceeded $500 million. The company also agreed to cooperate fully with the Antitrust Division’s ongoing criminal investigation. As part of the agreement, the parties will file a joint motion, subject to court approval, to defer for the term of the agreement any prosecution and trial of the charges.

Delrahim statement. "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," said Makan Delrahim, Assistant Attorney General in charge of the Antitrust Division. "Sandoz conspired for years with other manufacturers and their executives to raise prices for critical medications, and the Antitrust Division will continue its ongoing investigation to hold both individuals and corporations accountable for these crimes."

Sandoz statement. In a statement, Carol Lynch, President of Sandoz, said: "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. 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."

Earlier plea from former Sandoz exec. A former senior pharmaceutical industry executive who worked for Sandoz, Hector Armando Kellum, pleaded guilty last month for his role in the conspiracy. Kellum was charged with restricting competition for generic drugs, including, but not limited to, clobetasol and nystatin triamcinolone cream. The charge was filed under seal on February 4 in the federal district court in Philadelphia and later unsealed. Kellum agreed to cooperate with the Antitrust Division’s ongoing investigation.

Companies: Sandoz, Inc.; Kavod Pharmaceuticals LLC; Rising Pharmaceuticals

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