Former Novartis exec pleads guilty in generics price-fixing conspiracy

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Hector Armando Kellum was charged for his role in an industrywide price-fixing scheme between 2013 and 2015. (Pixabay)

Amid an industrywide price-fixing probe that has roped in some of the largest generics players, three executives have faced federal charges for their alleged roles. Now, the wide-ranging probe has snared another former exec––this time a big fish at Novartis' generics unit. 

Hector Armando Kellum, a former senior executive at Sandoz, pleaded guilty Friday to federal conspiracy charges for his role in a scheme to fix prices for a range of the drugmaker's products, including topical steroid clobetasol and antifungal nystatin triamcinolone cream. 

Kellum faces 10 years in prison and a $1 million fine, prosecutors said in a release. In exchange for his plea, Kellum agreed to cooperate with the ongoing federal investigation. 

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Kellum's plea has now confirmed Sandoz's role in the scheme––easily the biggest company so far––but more generics giants could be in the firing line as the lineup of cooperating witnesses expands. 

Kellum's deal comes just two weeks after prosecutors charged Ara Aprahamian, a former sales executive at Taro Pharma. Aprahamian was charged Feb. 4 to three counts of conspiring to fix prices for the company's generic drugs and lying to investigators. 

RELATED: Federal prosecutors snare 3rd generics exec in price-fixing investigation

Aprahamian was targeted for his stints as vice president of marketing and VP of sales and marketing between 2013 and 2016, during which he spearheaded two separate price-fixing campaigns with unnamed drugmakers in New Jersey and Pennsylvania then later lied about his role in the schemes, prosecutors said.

Federal prosecutors called Kellum and Aprahamian "co-conspirators" in the price-fixing scheme, with Kellum's role falling between March 2013 and at least June 2015.

Kellum's charges take the total count of execs charged in the federal price-fixing probe up to four, with three having already struck plea deals, prosecutors said.

In addition to Aprahamian, Jeffrey Glazer and Jason Malek, the former CEO and president of Heritage Pharmaceuticals, respectively, inked deals in 2017 to settle charges leveled the month before.

Prosecutors have also brought cases against two New Jersey-based drugmakers—including Heritage—for their roles in price-fixing schemes. In those cases, Rising Pharmaceuticals agreed in December to pay $3 million in exchange for a guilty plea in a scheme to set prices for hypertension med Benazepril HCTZ. Heritage reached a deal in March to pay $7 million to cooperate with the feds in their probe.

RELATED: Teva starred in price-fixing scheme, but 19 other companies 'willingly' joined, attorneys general claim

Kellum's plea has now confirmed Sandoz's role in the scheme––easily the biggest fish so far––but more generics giants could be in the firing line.

In May, 44 states launched a mammoth case against 20 generic drug makers that Connecticut Attorney General William Tong called "the largest cartel case in the history of the United States."

The suit directly named Maureen Cavanaugh, Teva's former SVP and chief commercial officer in North America, and three lower-level executives who no longer work at the company. Aside from Teva, the lawsuit implicated Sandoz, Mylan, Pfizer and several other leading generic drug makers. It names current and former executives from Lupin, Glenmark and other companies. 

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