Teva Pharmaceutical Industries and other generic drugmakers have held talks with the U.S. Justice Department in the past six months about resolving a long-running criminal antitrust probe involving allegations of price-fixing by the companies, according to people familiar with the matter.
Among the possible outcomes that have been discussed are deferred prosecution agreements in which the companies would admit to certain allegations but would be shielded from indictment in exchange for cooperating with the investigation and paying fines.
Talks are being held with the drugmakers individually, and any one or all of the negotiations could fail to result in an agreement, according to the people, who asked to remain anonymous because the discussions are private. The timetable for reaching any accord isn't clear. The government could still decide to indict any of the companies, a person familiar with the talks said.
A unit of the Indian generics giant Sun Pharmaceutical Industries has also been in talks with federal prosecutors.
"We continue to cooperate with the DOJ's investigation," said Teva spokeswoman Kelley Dougherty. "As with any government investigation or litigation, we are willing to entertain possible resolution but only if it makes sense for the company, our shareholders and the patients that we serve. We will continue to defend ourselves vigorously in these matters."
The Justice Department declined to comment on the status of its investigation. Sun spokeswoman Vinita Alexander also declined to comment.
Prosecutors have been investigating allegations that generic drugmakers conspired to prop up the prices of certain widely used medications for more than five years, and they have hinted several times this year that charges could be imminent. Nine of every 10 prescription drugs dispensed in the U.S. are generics, and lawmakers say the suspected illegal coordination on pricing has cost federal health programs billions of dollars.
At the same time, makers of generic drugs are grappling with forbidding economics. Profit margins in the business have always been thin. As more drugs enter the market and drive prices even lower, new alliances among insurers and pharmacy-benefit managers have also eroded the drug companies' pricing power.
The case has also forced the government to wrestle with competing priorities: On the one hand, the Trump administration wants to make drugs as affordable as possible and broaden access to a variety of medicines. But a criminal conviction could lead to a drug company being barred from doing business with Medicare and Medicaid -- and drive up costs by narrowing the options of government drug purchasers.
Those considerations could make deferred prosecution pacts attractive to both sides. Under such an agreement, drugmakers could continue to do business with the government, preserving billions of dollars in annual sales.
For prosecutors, such an accord could avoid a conviction that would inadvertently limit competition and increase the prices of common medications. It would also help wrap up a case that has targeted the biggest names in the industry but has yet to produce charges against any major company, even as state officials have accused the drugmakers in civil cases of a conspiracy to raise prices.
Bloomberg News has previously reported that the multiyear antitrust investigation, which has targeted more than a dozen companies, has faced numerous obstacles. Congress recently pressured the Justice Department to disclose the status of the investigation.
The Justice Department reached a deferred prosecution agreement with closely held generic drugmaker Heritage Pharmaceuticals Inc. in May, providing a potential road map for subsequent pacts. Previously, two executives from the drugmaker pleaded guilty to charges connected to the federal probe.
Teva has met multiple times this summer and fall with prosecutors to discuss deferred prosecution agreements, according to people familiar with the matter. Chief Executive Officer Kare Schultz said on a Nov. 7 call with investors that the company had provided federal prosecutors with more than 1 million documents.
"We have not found any evidence that we were in any way part of any structured collusion or price-fixing," Schultz said on the call, "but we remain of course in dialogue with the Department of Justice."
Sun Pharmaceutical, India's largest drugmaker, has been in discussions with federal prosecutors in recent months about the case against its subsidiary Taro Pharmaceutical Industries, according to people familiar with the talks.
Deferred prosecution agreements have been used to resolve criminal allegations in high-profile investigations of HSBC Holdings and General Motors, though the Justice Department's antitrust unit has used such deals only rarely. In July, the department's antitrust division made changes to its criminal-enforcement policy that allow for deferred prosecution agreements to be considered.
Business on 11/26/2019