Pharmaceuticals

Novartis subsidiary Sandoz to pay $195 million over antitrust allegations

Key Points
  • The Justice Department says pharmaceutical company Sandoz will pay a $195 million penalty to resolve criminal charges of conspiring to fix prices and rig bids for generic drugs.
  • Officials say Monday that the company would admit guilt and pay the penalty.
Fabrice Coffrini | AFP | Getty Images

The Justice Department said Monday that pharmaceutical company Sandoz will pay a $195 million penalty to resolve criminal charges of conspiring to fix prices and rig bids to stifle competition for generic drugs.

As part of the agreement, the generic pharmaceutical company headquartered in Princeton, New Jersey will admit guilt and pay the penalty, which the Justice Department says is the largest fine the department had levied in a domestic antitrust case.

Officials said the company conspired between 2013 and 2015 with other drug manufacturers and their executives to raise prices for critical medications, hurting vulnerable consumers such as the elderly. The price-fixing affected more than $500 million in Sandoz's generic drug sales, the Justice Department said. It involved drugs used to treat a range of chronic problems and pain conditions including arthritis, hypertension, seizures, various skin conditions and blood clots, according to officials.

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Under the agreement, criminal prosecution will be deferred for three years. Sandoz, part of the Swiss pharmaceutical giant Novartis AG and one of the largest generic drug makers in the U.S., also agreed to cooperate with an ongoing Justice Department criminal investigation of the generic pharmaceutical industry. Earlier charges against Heritage Pharmaceuticals and Rising Pharmaceuticals also were resolved with criminal penalties and deferred prosecution agreements.

The move came after a former senior executive of Sandoz, Hector Armando Kellum, pleaded guilty last month to conspiring with other drug company executives to fix prices and rig bids for generic drugs. Two other industry executives have pleaded guilty, and another was indicted last month and is awaiting trial.

"Today's resolution, with one of the largest manufacturers of generic drugs, is a significant step toward ensuring that prices for generic drugs are set by competition, not collusion, and rooting out antitrust crimes that cheated American purchasers of vital medicines," said Assistant Attorney General Makan Delrahim.

Officials said the decision to defer prosecution of Sandoz took into account the "significant" impact on the public that likely would result from a criminal conviction, because the government bans health care suppliers that have been convicted of certain crimes from participating in all federal health care programs, such as Medicare. In addition, Sandoz quickly accepted responsibility for its wrongdoing in the case and cooperated with the investigation, the Justice Department said.