Novartis shells out $195M to settle criminal charges in generics price-fixing probe

Novartis
Novartis is the single largest player bagged as part of the Department of Justice's yearslong generics price-fixing probe. (Novartis)

When federal prosecutors nabbed a guilty plea from a former exec at Novartis' Sandoz in an expansive price-fixing probe, it seemed to spell trouble for the massive generics player. Now, the other shoe has dropped for Novartis—to the tune of $195 million and an extraordinary confession—and more could be on the way.

Novartis agreed Tuesday to pay $195 million and enter deferred prosecution to settle federal claims it colluded in an industrywide price-fixing scheme between 2013 and 2015, the U.S. Department of Justice (DOJ) said. 

The criminal settlement is the single largest domestic antitrust deal ever signed, the DOJ said in a release, and it comes two weeks after a former Sandoz unit exec pleaded guilty to federal conspiracy charges in the scheme. 

As part of its agreement, Novartis admitted "its sales affected by the charged conspiracies exceeded $500 million," the DOJ said in a release, and it agreed to cooperate in the department's ongoing investigation.

Novartis is also in discussions to settle claims with the DOJ's civil division and has provisioned an additional $185 million for that effort, the company said in a release. 

"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. "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."

RELATED: Former Novartis exec pleads guilty in generics price-fixing conspiracy

In February, Hector Armando Kellum, a former senior executive at Sandoz, pleaded guilty 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. 

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

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 Pharmceuticals—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 2018 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

With Novartis directly admitting the scheme affected its sales, more big-name drugmakers 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 senior vice president 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, as well.

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