A Sandoz medication. Picture: FRED TANNEAU / AFP
A Sandoz medication. Picture: FRED TANNEAU / AFP

Washington — Novartis’s Sandoz unit agreed to pay $195m to settle US criminal charges that it conspired with other pharmaceutical companies to fix prices of generic drugs, the most significant settlement to come from a long-running justice department investigation.

Sandoz conspired with four of its competitors between 2013 and 2015 to rig drug prices, the department said Monday. The settlement marks the largest penalty obtained by the US in a domestic cartel case, the government said. Sandoz agreed to co-operate with the antitrust division’s continuing investigation.

Sandoz admitted that the sales affected by the conspiracies exceeded $500m and involved drugs for common skin conditions, high blood pressure and cystic fibrosis, according to the department.

“Today’s resolution, with one of the largest manufacturers of generic drugs, is a significant step towards ensuring that prices of generic drugs are set by competition, not collusion,” said antitrust chief, Makan Delrahim, in a statement.

Novartis said that Sandoz had co-operated with the government’s investigation, and individuals implicated in the underlying contact are no longer employed at the company. Sandoz will also work to enhance its compliance program, employee training and monitoring as a part of the three-year deferred-prosecution agreement.

“We take seriously our compliance with antitrust laws, and in reaching today’s resolution, we are not only resolving historical issues but also underscoring our commitment to continually improving our compliance and training programs and evolving our controls,” Sandoz president Carol Lynch said in a statement.

Civil lawsuit

Sandoz said it’s also in settlement negotiations with the civil division of the department to resolve potential related claims and is setting aside $185m for that case. Sandoz is facing a civil lawsuit filed by state attorneys general led by Connecticut.

Sandoz, which accounts for one-fifth, or nearly $10bn, of Swiss drug giant Novartis’s annual revenue, is the largest and best-known company to reach a resolution of US price-fixing allegations so far. The government has reached settlements with two small generic drugmakers and charged four executives.

The agreement helps resolve a cloud that has hung over Sandoz after becoming the subject of state and federal investigations that began in 2014 into price-fixing allegations by generic-drug companies. The probes have targeted the biggest names in the industry, including Mylan   and Teva Pharmaceutical Industries.

The generics industry has been navigating years of increasingly thin profit margins on copycat medicines in the US, which has weighed on their businesses. Nine in 10 prescription drugs dispensed in the US are generics. Legislators have alleged that illegal generic pricing co-ordination over the years has cost federal health programmes billions of dollars.

The pact is a sign that prosecutors are continuing to press forward with a sprawling investigation that at times has encountered substantial roadblocks in securing the co-operation of witnesses, among other obstacles. In 2019, Bloomberg News reported that a number of drugmakers have talked to the department about resolving the probe.

The accord, known as a deferred-prosecution agreement, will stay in effect for three years and comes after a former Sandoz executive, Hector Armando Kellum, pleaded guilty in February to a price-fixing charge and agreed to co-operate with the Justice Department’s investigation. At least two other Sandoz executives are also co-operating with the government, according to court papers.