Multiple lawsuits accusing the Philadelphia-based Lannett Co. Inc. – owner of Cody Labs – and numerous other drug manufacturers of conspiring to fix prices for generic drugs recently took a new twist.
The U.S. Department of Justice released settlement details May 31 in which Heritage Pharmaceuticals, headquartered in New Jersey, has admitted to one felony charge of price fixing glyburide, a medication used to treat diabetes.
Court documents related to price fixing investigations previously revealed Heritage had more contact with LCI then any other generics company.
In the story “Lannett: Industry-Wide Drug Pricing Case Enters the Criminal Phase” published online June 4 at seekingalpha.com, thewriter is predicting a dire outcome for LCI.
Seeking Alpha is a website where financial experts offer insights into the stock market. The June 4 story attempts to explain how the Heritage plea agreement could affect Lannett.
Referencing a chart that describes interactions between Heritage and LCI – reportedly information resulting from the investigation and cooperation of Heritage Pharma – the writer says it shows LCI represented 22 percent of conversations and texts captured by the investigation.
“The issue at hand is that we now know this case includes multiple factions of the federal government pursuing parallel cases with the intention of charging people and companies with criminal misconduct,” the story reads. “We now also know that at least one of those companies has plead out, admitted guilt, and turned on their co-conspirators.”
Faced with debt and the loss of a significant supplier, LCI last year responded with plans to restructure its operations. Consequently, it shut down construction of a $50 million Cody Labs manufacturing campus on Road 2AB. It’s also downsized Cody Labs as a cost savings measure and put the local prescription drug maker on the market for sale.
LCI and two employees were named in a civil lawsuit filed by the State of Connecticut May 10. The case includes allegations of price fixing levothyroxine and baclofen by LCI and other companies, along with claims against Lannett regarding doxycycline.
The two LCI employees are accused of exchanging hundreds of phone calls and text messages with other companies named as defendants.
On May 31 the DOJ announced Heritage admitted to working with several other companies and individuals April 2014-December 2015 to fix prices, rig bids and allocate customers for the glyburide treatment, in violation of antitrust law. Heritage has agreed to pay $7 million-plus in criminal penalty and civil damages.
In a deferred prosecution agreement resolving the charge with the antitrust division, Heritage agreed to “cooperate fully” with the criminal investigation into the generics industry.
According to the agreement, this cooperation allows the U.S. to expand its investigation into criminal antitrust conspiracies among other manufacturers of generic pharmaceuticals. The DOJ’s continuing criminal investigation with the FBI and the U.S. Postal Service Office of Inspector General as partners, involves drugs other than those identified in the glyburide charge.
The agreement will not be final until accepted by the court.
The grand jury in the Eastern District of Pennsylvania formed by the DOJ to investigate collusion in the industry, has issued subpoenas and other requests for information to various generic pharmaceutical manufacturers, including defendants Heritage and Lannett.
In December 2016, the DOJ filed the first criminal charges stemming from its investigation.
Nast Law firm is helping investigate the anticompetitive conduct of the generic drug industry.
“As a result, prices for certain drugs have surged as much as 8,000 percent since 2013,” says Nast Law on its website.
According to the firm, manufacturers point to other factors such as plant closures and industry consolidation as reasons for price increases.
It goes on to point out Heritage’s $7 million fine is for just one drug and glyburide is not a product that sells near the same level as levothyroxine, the most prescribed drug in America.
“The estimates for fines regarding larger drugs should be much higher – and for LCI could reach as high as $200-250 million,” the Seeking Alpha story says.
The writer concludes the Heritage settlement is basically the DOJ announcing its plan to pursue criminal charges against individuals and companies associated with the generic price-fixing case.
“The first charges targeted Heritage – who happened to choose co-operation to garner a deferred prosecution agreement after handing over evidence that included the fact they spoke to LCI more often then any other company involved,” the writer says. “This can’t be good. What size fine could LCI possibly handle with roughly $600 million in net debt and the loss of their most profitable product?”
In the meantime, LCI continues to implement strategies it says will put the company in a positive direction.
In a May 29 company announcement, CEO Tim Crew said more than 20 new products have been launched over the past 18 months. Since Jan. 1, LCI launched six products and expects to launch several more in the coming months.
LCI spokesperson Robert Jaffe did not respond to an email sent Wednesday seeking comment on the Seeking Alpha story in relation to the DOJ announcement.