Pharmaceutical Manufacturing Companies Agreed to Civil Settlement Amounting to $400 Million in Restitution for Fix-Pricing Schemes of Generic Drugs

Over $400 million is to be paid by three generic pharmaceutical manufacturers to resolve alleged violations of the False Claims Act. Taro Pharmaceutical USA, Inc., Sandoz Inc., and Apotex Corporation are reported to have violated the False Claims Act by conspiring with each other to alter the price of various generic drugs, resulting in the excessive inflation of drugs prices for federal health care programs. According to the United States Justice Department, the three generic pharmaceutical manufacturers have agreed to pay a total of $447.2 million to settle the alleged violations of the False Claims Act on October 2, 2021.

$400 Million Settlement Overview

Three pharmaceutical manufacturing companies – Taro Pharmaceutical USA, Inc., Sandoz Inc., and Apotex Corporation – agreed to pay a total of more than $400 million to resolve claims over alleged violations of the False Claims Act consequent to conspiring with several other pharmaceutical companies to fix the prices of various generic drugs and receiving kickbacks through taking advantage of a number of federal health care programs. On October 2, 2021, the United States Department of Justice announced the three civil settlement agreements, which were reported as the third, fourth, and fifth cases in the investigation. Taro USA agreed to pay $213.2 million with an interest rate of 0.75 percent, Sandoz agreed to pay $185 million with an interest rate of 1.25 percent, and Apotex agreed to pay $49 million with an interest rate of 1.25 percent to compensate for the damages caused by their price-fixing schemes. The generic drug manufacturing companies named in the settlement agreements have previously entered a deferred prosecution agreement (DPA). They are to pay an outstanding settlement amount in addition to the criminal penalties noted in the DPAs.

Details of the Settlement Agreement

The United States government contends that between the years 2013 and 2015, Taro Pharmaceutical USA Inc., Sandoz Inc., and Apotex Corporation have all engaged in the payment and receipt of remuneration through allegedly conspiring with other pharmaceutical manufacturers in the arrangement of price, supply, and allocation of customers for the sale of particular generic drugs manufactured by pharmaceutical companies. The scheme of the three companies violated the federal Anti-Kickback Statute as it involved the compensation of referral of other generic drug companies reimbursable by federal health care programs. Moreover, the government alleges that the three pharmaceutical companies have submitted or caused the submission of claims for payment to the Medicare Program, and the TRICARE Program, as well as caused the purchases by the Veterans Affairs’ Veterans Health Administration and the Department of Defense’s Defense Logistics Agency.

Settlement Agreement with Taro Pharmaceutical USA Inc.

Taro USA is a pharmaceutical manufacturer of generic drugs headquartered in New York. The Taro USA drug company has executed a Deferred Prosecution Agreement with the Antitrust Division of the United States Department of Justice (DOJ) in line with a piece of two-count criminal information in the United States District Court for Eastern Pennsylvania, on top of agreeing to pay $213.2 million in restitution and interest on the Settlement Amount. Taro USA is assumed to have tampered with the prices and sales of a wide variety of drugs, including etodolac – a nonsteroidal anti-inflammatory drug used to treat pain and arthritis, and nystatin-triamcinolone cream and ointment – a combination of an antifungal medicine and steroid meant to treat certain kinds of skin infections.

Settlement Agreement with Sandoz Inc.

Sandoz Inc., a generic drug manufacturer located in Princeton, New Jersey, and incorporated in Delaware, shall pay the United States a total of $185 million in restitution and interest on the Settlement Amount. The reported drugs that Sandoz Inc. issued were benazepril HCTZ – a medication for hypertension, and clobetasol – a corticosteroid used for skin conditions, among other listed generic drugs. Sandoz Inc. also executed a Deferred Prosecution Agreement with the Antitrust Division of the U.S. DOJ, connected with four-count criminal information in the U.S. District Court for the Eastern District of Pennsylvania.

Settlement Agreement with Apotex Corporation

Apotex Corporation, a company involved in marketing pharmaceutical products headquartered in Florida and incorporated in Delaware, has agreed to pay $49 million to compensate for the damage caused and interest fees. With the least number of criminal information, Apotex Corporation also entered a Deferred Prosecution Agreement with the Antitrust Division of the U.S. Department of Justice linked to a piece of one-count criminal information in the U.S. District Court for the Eastern District of Pennsylvania. The Apotex drug company has been associated with the sale of pravastatin – a statin medicine used to help treat high cholesterol and triglyceride levels.

Settlement Amount and Details

All three pharmaceutical companies – Taro Pharmaceutical USA Inc., Sandoz Inc., and Apotex Corporation – face interest on the settlement amount, in which both Sandoz and Apotex have been subjected to a 1.25 percent rate, and Taro USA at 0.75 percent rate accruing from March, May, and November 2020 for each of the following drug companies, respectively. In line with the settlement agreements, each generic drug company has also entered a five-year corporate integrity agreement (CIA) with the Office of the Inspector General, wherein all three companies are subjected to special internal monitoring and price transparency provisions. Furthermore, the drug companies are required to implement compliance measures such as obtaining compliance-related certifications from company executives and board members, executing risk assessment programs, and generating recoupment provisions.

Criminal Penalties and Deferred Prosecution Agreements

As mentioned above, all three pharmaceutical manufacturers have previously entered into a deferred prosecution agreement with the Antitrust Division of the U.S. Department of Justice in order to resolve related criminal charges in the Office of the U.S. Attorney for the Eastern District of Pennsylvania. Taro Pharmaceutical USA Inc. faced a criminal penalty amounting to $204.6 million after conspiring with two other generic drug manufacturers to fix prices on certain generic drugs. Sandoz Inc. paid a criminal penalty of $195 million subsequent to admission of liability to conspiring with four other pharmaceutical companies. Apotex Corporation was fined $24.1 million in a criminal penalty after admitting to conspiring to increase and maintain the price of pravastatin. The civil settlement agreement on release on October 2, 2021, is additive to the criminal penalties paid by the three pharmaceutical companies.

Statement by Acting Assistant Attorney General Brian M. Boyton of the Civil Division of the Justice Department

Acting Assistant Attorney General Brian M. Boyton of the Civil Division of the Justice Department noted that the illegal collaboration of creating schemes that inflate the prices and manipulate the supply of drugs negatively affects federal health care programs and beneficiaries. He then asserted that the department would focus its resources to prevent the advent of such federal violations and to protect all of the federal health care programs funded by the taxpayers.

“Illegal collaboration on the price or supply of drugs increases costs both to federal health care programs and beneficiaries. The department will use every tool at its disposal to prevent such conduct and to protect these taxpayer-funded programs,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division.

Statement by Acting U.S. Attorney Jennifer Arbittier Williams for the Eastern District of Pennsylvania

The civil settlements with the three pharmaceutical manufacturers are additional accomplishments achieved by the Office of United States Attorney for the Eastern District of Pennsylvania, said Acting U.S. Attorney Jennifer Arbittier Williams. The office was noted to have emphasized holding generic drug companies accountable for the damages caused by their price-fixing schemes, primarily their actions that led to the harm of federal health care programs. Despite the resolution of this case, Acting U.S. Attorney Williams asserted that the United States Attorney’s Office for the Eastern District of Pennsylvania would persist with its efforts to pursue violations of the Anti-Kickback States and the False Claims Act all while acquiring a significant amount in restitution.

“These civil settlements are another achievement in my office’s efforts to hold generic drug companies accountable for the consequences arising from price-fixing schemes, including the harm to federal health care programs. We will continue to aggressively pursue these violations of the Anti-Kickback Statute and the False Claims Act and obtain significant recoveries,” said Acting U.S. Attorney Jennifer Arbittier Williams for the Eastern District of Pennsylvania.

Statement by Special Agent in Charge Maureen R. Dixon of the Philadelphia Regional HHS-OIG

Special Agent in Charge Maureen R. Dixon of the Philadelphia Regional Office of the Inspector General, Department of Health and Human Services (HHS-OIG) condemned the individuals who engage and conspire to increase prices on generic medications, claiming that it is illegal and could potentially prevent patients from being able to afford necessary prescription drugs. She further asserted that Americans are entitled to access generic drugs set to be fair and open competition instead of collusion. Special agent in Charge Dixon also contended that the HHS-OIG, in collaboration with their law enforcement partners, will continue to investigate companies that are alleged to be involved in schemes that harm the Medicare Program, and ultimately, the public.

“Conspiring to raise prices on generic medications is illegal and could prevent patients from being able to afford their needed prescription drugs. Americans have the right to purchase generic drugs set by fair and open competition, not collusion. HHS-OIG along with our law enforcement partners will continue to investigate allegations of companies engaging in actions that put the public and the Medicare program at risk,” said Maureen R. Dixon, who is the Special Agent in Charge of the Philadelphia Regional Office of the Inspector General, Department of Health and Human Services (HHS-OIG).

Statement by to Chief Counsel Gregory E. Demske for the Inspector General at HHS

According to Chief Counsel Gregory E. Demske for the Inspector General at HHS, the corporate integrity agreements that the three generic drug manufacturers were put under promote transparency and accountability by compelling the companies to report price-related information to the OIG. Moreover, mandating individual certifications by critical executives involved in pricing and contracting functions aid in the prevention of similar occurrences in the future, which would protect the Medicare, Medicaid, and federal health care program, patients.

“These kickback schemes harm Medicare, Medicaid, and patients. The CIA’s promote transparency and accountability by requiring the companies to report price-related information to OIG and mandating individual certifications by key executives involved in pricing and contracting functions,” said Chief Counsel Gregory E. Demske for the Inspector General at HHS.

Statement by Special Agent in Charge Patrick J. Hegarty of the DCIS Northeast Field Office

Protecting TRICARE – the healthcare system for U.S. military members and their dependents – is a top priority for the Department of Defense, Office of Inspector General, Defense Criminal Investigative Service (DCIS), claimed Special Agent in Charge Patrick J. Hegarty of the DCIS Northeast Field Office. This is due to the fact that the inflation of generic drug prices caused by pharmaceutical companies undermines the integrity of TRICARE, which also leads to the unnecessary burden being placed on federal health care programs. Special Agent in Charge Hegarty announced that the settlement agreements involving the three pharmaceutical manufacturers result from a joint effort, which demonstrates the ongoing commitment of DCIS in investigating health care fraud in partnership with the DOJ Civil Frauds, the USAO-EDPA, and with other law enforcement agencies.

“Protecting TRICARE, the healthcare system for U.S. military members and their dependents, is a top priority for the Department of Defense, Office of Inspector General, Defense Criminal Investigative Service (DCIS). When pharmaceutical corporations artificially inflate prices, they undermine the integrity of TRICARE and place an unnecessary financial burden on the program. The settlement agreements announced today are the result of a joint effort and demonstrate the ongoing commitment of DCIS to work with our law enforcement partners, DOJ Civil Frauds and the USAO-EDPA, to investigate healthcare fraud,” said Special Agent in Charge Patrick J. Hegarty, DCIS Northeast Field Office.

Anti-Kickback Statute

The Anti-Kickback Statute prohibits individuals and companies from receiving payment or acquiring monetary gain for arranging the sale or purchase of items such as medication for which a federal health care program may make reimbursement. The provisions of the Anti-Kickback Statute were designed to guarantee that the supply and price of health care commodities are not compromised or taken advantage of through improper financial incentives by potential offenders. The settlement agreements made with the three pharmaceutical companies demonstrate the vital role of the False Claims Act in ensuring that the United States is fully compensated for the loss of taxpayers’ money that is intended for health care.

Law Enforcement Partners

Settlement agreements made with the Taro Pharmaceutical USA Inc., Sandoz Inc., and Apotex Corporation are the third, fourth, and fifth cases arising from the investigation handled by the Civil Division’s Commercial Litigation Branch of the Fraud Section the U.S. Department of Justice. The civil settlement agreements announced on October 2, 2021, was in partnership with the Office of the United States Attorney for the Eastern District of Pennsylvania with support from the Office of Inspector General for the Department of Health and Human Services, the Defense Health Agency Program Integrity Office, Defense Criminal Investigative Service, and the Office of Inspector General for the Department of Veterans Affairs.  

Civil Litigation Attorneys

The legal matters in the civil settlements were handled by Senior Trial Counsels Jennifer L. Cihon and Laurie A. Oberembt, along with Assistant U.S. Attorneys Landon Y. Jones III, Rebecca S. Melley, and Anthony D. Scicchitano.

Investigation and resolution of matters involving federal health care programs demonstrate the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Information and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS OR (800) 447-8477.

With the exception of the facts admitted to in the deferred prosecution agreements, the claims resolved in the civil settlements are mere allegations only. They do not pertain to the determination of liability.