A source close to the matter has confirmed that federal prosecutors are readying themselves to file criminal charges against organisations and individuals in the US generic-drug industry, according to a report released late last week by Bloomberg News. Though it is not yet known which actors may be targeted, the DoJ has already subpoenaed several key players in the industry – among them, Teva Pharmaceutical Industries, Mylan NV, Dr Reddy’s Laboratories, Taro Pharmaceuticals, Endo International PLC and Actavis, which was recently sold to Teva. The DoJ inquiry has sought information about product pricing and ‘communication with competitors’, according to the companies’ filings with the Securities and Exchange Commission over the last two years.
Share prices plummet
The Bloomberg News report has rocked share prices among the companies involved, with Mylan, Teva and Endo international each shedding 6.9 per cent, 9.5 per cent and 19.5 per cent respectively at the close of trading on Thursday. The hardest hit was smaller Philadelphia-based generic-drug manufacturer Lannett, for which shares plunged 26.6 per cent. Life-saving heart failure drug digoxin is produced by Lannett, and has been flagged as one of the products ‘of interest’ to the ongoing DoJ investigation. Pricing for Lannett’s digoxin skyrocketed 857 per cent between April 2013 and April 2015 under the leadership of longtime chief executive Arthur Bedrosian, and is one of the drugs credited with driving Lannett’s rapid financial assent.
Heated political issue
While there is no law in the United States that blocks pharmaceutical companies from increasing the prices of their products, it is illegal for such companies to coordinate on their prices. The issue of drug pricing has drawn considerable political ire in the US over the last year, helped along by high-profile controversies such as that of Martin Shkreli, a former hedge fund manager who acquired an older antiparasitic drug only to raise its price from $13.50 to a staggering $750 per pill. While both regulatory intervention and public outrage have been largely focused on more expensive brand-name drugs, the DoJ is now turning its attention to generic-make drugs which account for around 88 per cent of all prescriptions dispensed in the US. Though the first charges in the current DoJ probe may be filed by the end of the year, sources have confirmed that the investigation is likely to continue into next year with rolling charges brought as determined by federal prosecutors.
Sources: Wall Street Journal; Bloomberg News; Forbes; CNBC
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