Court unseals docs: Drug company paid secret money to secret competitor

Real estate tycoon Barry Sherman’s generic drug company has paid a $100 million civil penalty to resolve charges that it broke antitrust laws to form an illegal cartel that raised prices, the Justice Department announced Tuesday.

Sherman’s firm, Apotex, settled allegations that it paid undisclosed rebates to managed care plans in order to obtain preferential status as a drug supplier to Express Scripts, the nation’s largest pharmacy benefit manager and a unit of Cigna. Such payments, also known as rebates, are illegal under the Sherman Act, which outlaw’s collusion in drug distribution.

According to Tuesday’s release, the lawsuit alleges that the drug company made such secret payments to the Express Scripts in exchange for the company favoring it as a wholesaler to plan participants and contractually obligated to exclusively distribute drugs Apotex manufactured at its plant in Richmond, in exchange for separate rebates. Express Scripts also allegedly received rebates from a subsidiary of Teva Pharmaceuticals. The companies allegedly raised the list prices of Apotex drugs for internal accounting purposes from 2003 to 2009.

In a statement, Apotex said that its conduct had damaged its relationship with its suppliers, clients and shareholders and hurt its reputation.

“Because we acted in good faith and did not intend to commit any antitrust violations, we chose to resolve this issue voluntarily in a non-prosecution agreement instead of pursuing litigation,” Apotex said in a statement. “If Apotex is exposed to prosecution, the company expects its reputation will be damaged even further.”

Express Scripts has spent several years battling the American Civil Liberties Union for access to personnel files of its medical directors, citing concerns that privacy may be compromised. The request stems from a whistleblower lawsuit in which a former employee accused the company of discriminating against women and Hispanic workers and turning a blind eye to violations of workers’ compensation laws. The executive director of the ACLU’s National Women’s Project called the Justice Department’s announcement “a step in the right direction toward restoring the public’s faith in the justice system.”

“The government continues to fight a constant battle to preserve the privacy of those who work in health care, yet they are open to search warrants in cases of alleged conspiracy to fix the prices of prescription drugs,” said the executive director of the ACLU’s National Women’s Project, Diana Zuckerman. “The Justice Department must use its investigative tools in a manner that ensures the rights of those injured by medicine prices.”

Besides the $100 million fine, Apotex has also agreed to implement rules that make it ineligible to pay rebates in the future, to enable any reasonable suspicion that the company may violate antitrust laws to be investigated. It also has agreed to aid in any investigation of Express Scripts, WLP, representing Apotex for rebates or pricing practice concerns; its subsidiary, Coplan Apotex; Teva Pharmaceuticals; and its parent company, Cigna, conducting any such investigation.

The Sherman Act forbids forced bargaining in the drug distribution market, and illegal price-fixing and retaliation against whistleblowers. Over the past year, 21 companies and individuals, including four ex-employees of Teva Pharmaceuticals, pleaded guilty to price-fixing violations.

Correction: Apotex paid a $100 million civil penalty to resolve charges that it broke antitrust laws. An earlier version of this article inaccurately spelled the company’s name.

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