Share prices for leading generics companies took a big hit Thursday on news that the Department of Justice could file collusion charges by year’s end, a probe first unveiled by Bloomberg.
Companies including Mylan, Teva, Lannett, Impax and Endo International face charges of price fixing, according to the report by David McLaughlin and Caroline Chen, following a DOJ investigation that’s lasted about two years. The probe ranges over two dozen drugs and “about a dozen companies,” Bloomberg’s Drew Armstrong tweeted on Thursday.
Two dozen drugs involved, about a dozen companies. Old school price-fixing between executives. Charges could go to high-level execs.— Drew Armstrong (@ArmstrongDrew) November 3, 2016
Charges may not be limited to the corporations themselves but could apply to individual executives as well. The Justice Department has recently moved to prosecute drug company management in kickbacks cases, part of a broader move to hold executives accountable for their companies' actions.
The investigation "could add a severe overhang to the sector that may last well past the presidential election and into the new year," Wells Fargo analyst David Maris wrote in a Thursday note. He said that even though fines "could be significant," what's more concerning for the industry is how the development might "bring calls for controls and oversight."
The news comes as U.S. officials work to tackle the popular election-year topic of drug pricing, following now-notorious price hikes by Turing Pharmaceuticals and Valeant Pharmaceuticals more than a year ago. Sen. Bernie Sanders and Rep. Elijah Cummings have been conducting their own investigations into generic drug pricing as well and have proposed mechanisms to limit price hikes.
Mylan, the generics maker whose EpiPen price hikes caused a firestorm of controversy over the past couple of months, was down 7% as of 3 p.m. Thursday afternoon. Teva shares were down 10% and Endo down nearly 15%. Lannett was down 20%.
Teva, Mylan, Sun Pharma, Mayne Pharma, Par Pharma and Taro Pharmaceutical Industries have each disclosed subpoenas relating to the investigation, according to reports.
In a statement, Mylan said it "is and has always been committed to cooperating with the Antitrust Division’s investigation. To date, we know of no evidence that Mylan participated in price fixing.”
Even though the generics industry maintains that its offerings reduce overall drug costs, news of the investigation comes on the heels of a separate report by the Los Angeles Times that demonstrated some generic prices soared in recent years despite heavy competition. The report cited Medicare data showing that, out of 10 meds with the biggest price hikes in 2014, 8 were generics with multiple manufacturers.
Ursodiol, a gallstone generic made by eight companies, was priced at 45 cents a capsule several years ago, according to the analysis. That was before Lannett raised the price to $5.10 in May 2014, a hike of more than 1,000%. In response, each competitor priced their versions near the same level.