DOJ Enters into Unprecedented Deferred Prosecution Agreements to Resolve Price-Fixing Allegations

DOJ Enters into Unprecedented Deferred Prosecution Agreements to Resolve Price-Fixing Allegations

August 29, 2023, Covington Alert

The U.S. Department of Justice (“DOJ”) announced on August 21, 2023 that it entered into deferred prosecution agreements (“DPAs”) resolving criminal price-fixing charges against Teva Pharmaceuticals USA, Inc. (“Teva”) and Glenmark Pharmaceuticals Inc., USA (“Glenmark”).[1] The DPAs come three years following the indictment of Teva and Glenmark for agreeing to increase and maintain prices of generic drugs sold in the United States. In an unprecedented move, the DPAs includes a provision that requires the companies to divest the generic drug product line at issue in the charged conspiracy as a remedial measure. Assistant Attorney General Jonathan Kanter emphasized the significance of this remedy, stating that companies in “heavily regulated industries are on notice that the division will not hesitate to hold them accountable and will not tolerate recidivism.”

Three years ago, Teva and Glenmark were indicted for conspiring to increase and maintain prices of the generic cholesterol drug, pravastatin, and other generic drugs. The August 21, 2023 DPAs incorporate expected requirements, including cooperation in the ongoing criminal investigation, compliance monitoring and reporting obligations, and criminal fines for Teva and Glenmark of $225 million and $30 million, respectively.

However, the DPAs make notable departures from those terms typically negotiated by the DOJ and the charged parties. In addition to the corporate fines, Teva and Glenmark are required to divest their respective product lines of pravastatin—the drug that DOJ alleged was “a core part of the companies’ price-fixing conspiracy.” This new provision, which the DOJ recognized as an “extraordinary remedy,” will require the companies to promptly divest their product lines under the DOJ’s supervision.

Further, Teva will be required to make a $50 million product donation of two additional generic drugs that were affected by the price-fixing agreement. Over a period of four years, Teva must donate $50 million worth of these drugs to humanitarian organizations.

The Teva and Glenmark DPAs mark the sixth and seventh companies to resolve criminal charges in the DOJ’s broader investigation into price-fixing and other anticompetitive conduct in the generic pharmaceutical industry.[2] However, the resolutions are notable for DOJ’s decision to defer prosecution at this stage of the case (three-years post-indictment), combined with the product divestiture remedies.

The Teva and Glenmark DPAs underscore that the DOJ is looking to novel resolutions for criminal matters beyond monetary penalties, including “extraordinary remedies” in instances where the Department determines that a fine is insufficient to compensate for the harm to competition and to deter repeat offenses.

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