Actavis gets subpoena as DOJ probe of generic pricing moves up food chain

Allergan ($AGN) may be shedding its background as a generic drug company with a name change and a $40 billion deal to sell that piece of its business, but it hasn't eluded federal investigators intent on probing possible collusion in generic drug pricing. The drugmaker has acknowledged that its Actavis unit has been drawn into the Justice Department's widening criminal probe.

The drugmaker in an SEC filing Thursday said that it had gotten a subpoena June 25 from the DOJ's Antitrust Division "seeking information relating to the marketing and pricing of certain of the Company's generic products and communications with competitors about such products." It said it intends to comply with the request. Actavis is the largest of the four drugmakers to confess they have gotten federal inquiries into pricing of copycat drugs, Bloomberg points out.

Vermont Sen. Bernie Sanders

Rapidly rising generic drug prices have caught the eye of consumers, elected officials and federal agencies alike. A Medicare report found that 10% of generic drug prices were up in a single year between July of 2013 and 2014, a report that Vermont Sen. Bernie Sanders has used as leverage for asking agencies to look into the issue. Federal authorities at several levels and from several different agencies have started looking into what has caused the run up in prices.

But the DOJ Antitrust division investigation, which became public last fall, is the most concerning to the industry because it is a criminal probe, the kind that can result in big company fines and land people in jail. The fact that Actavis is also the fourth largest generics drugmaker to be drawn in, suggests investigators are moving up the food chain. Impax Laboratories ($IPXL), Lannett ($LCI) and Par Pharmaceutical all earlier said either their company, or members of their sales organizations, had been subpoenaed to provide investigators with inside info on what they have been talking with competitors about when it comes to drug prices.

Sources have also said that the DOJ is looking into whether trade associations were used as a conduit to trade drug-pricing information. Policy and Regulatory Report, recently disclosed that a source privy to probe said the DOJ is looking closely "at trade associations as part of their investigation as having been one potential avenue for facilitating the collusion between salespeople at different generic producers."

Allergan received the DOJ inquiry just two days before it announced last week it would sell Actavis to Teva ($TEVA) in a $40.5 billion cash and stock deal so that it could focus primarily on the branded drug portfolio it has built up through a series of acquisitions. It recently took on the Allergan name after completing its $66 billion deal for the maker of Botox.

- here's the SEC filing
- read the Bloomberg story

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