WEBVTT - Perrigo's Generic Drugs Get DOJ Review (Audio)

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<v Speaker 1>Generic drug companies are facing a sweeping federal criminal investigation

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<v Speaker 1>into possible price fixing, and the consequences could be serious.

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<v Speaker 1>According to a document filed in court, prosecutors are examining

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<v Speaker 1>the prices of skin treatments made by Parago and a

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<v Speaker 1>handful of other companies. For more than two years, the

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<v Speaker 1>Justice Department has been looking at the pricing of generic

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<v Speaker 1>medicines made by about a dozen companies. Price hikes and

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<v Speaker 1>generic drugs were also the subject of congressional hearings, lawsuits

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<v Speaker 1>brought by consumers and state attorneys general, and a problem

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<v Speaker 1>Senator Bernie Sanders has been fighting before the presidential campaign

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<v Speaker 1>and during it. People cannot afford the medicine they need.

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<v Speaker 1>Five major drug companies make fifty billion dollars in profits

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<v Speaker 1>last year, joining us as Bloomberg Intelligence senior litigation analyst

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<v Speaker 1>to Jennifer ree Jenner, this letter is interesting. It asked

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<v Speaker 1>the judge to pause discovery in some civil suits. Why

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<v Speaker 1>is the government doing that? Well, you know what you

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<v Speaker 1>have happening here with which often happens when there's a

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<v Speaker 1>d J in a Department of Justice investigation, especially of

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<v Speaker 1>price fixing, is that they have this ongoing investigation. They

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<v Speaker 1>may already be talking to certain executives or companies about

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<v Speaker 1>putting in guilty, please about paying a fine. And when

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<v Speaker 1>the private litigation that follows it gets started, oftentimes the

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<v Speaker 1>plaintiffs will seek the documents that have already been turned

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<v Speaker 1>over to the d o J did to get them

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<v Speaker 1>quickly and get going. And they it's called discovery, which

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<v Speaker 1>which plaintiffs and defendants gonna ask for in a private litigation.

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<v Speaker 1>And the Department of Justice is worried that when that

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<v Speaker 1>starts to happen, it's going to mess up and interfere

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<v Speaker 1>with their process. And they're simply saying, look, just just

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<v Speaker 1>hold off, because we have this process process going. You

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<v Speaker 1>can get this case started, but let us finish what

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<v Speaker 1>we're doing here first. Well, presumably this is also fairly complicated,

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<v Speaker 1>this scheme, And so what could you outline for us,

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<v Speaker 1>you know, to the extent we know, we've got criminal investigations,

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<v Speaker 1>we have private law scuds, we have attorney generals and

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<v Speaker 1>all we have all sorts of things, all sorts of

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<v Speaker 1>ways in which is being looked at legally. Kind of

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<v Speaker 1>one are the contours of the kind of price fixing

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<v Speaker 1>scheme we're talking about here. Well, this is all really

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<v Speaker 1>even though these investigations you mentioned have been ongoing since

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<v Speaker 1>sometime late two thousand fourteen or mid two thousand fourteen,

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<v Speaker 1>it's actually in a weird way still kind of at

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<v Speaker 1>the beginning. Um, it seems like we've had an investigation

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<v Speaker 1>by Connecticut and an investigation by the Department of Justice,

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<v Speaker 1>and it seems like, at least out of Connecticut's investigation,

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<v Speaker 1>we have a statement that they have seen evidence of

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<v Speaker 1>what they call a widespread conspiracy involving many companies and

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<v Speaker 1>many drugs, and their investigation, by the way, is ongoing

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<v Speaker 1>as well. So, Michael, it does seem complicated. It seems

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<v Speaker 1>like it involves a lot of companies, It seems like

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<v Speaker 1>it involves a lot of drugs and ongoing. Now you

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<v Speaker 1>have private cases brought against about twenty seven different companies

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<v Speaker 1>that implicate about fourteen different drugs. Two former Heritage executives

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<v Speaker 1>pleaded guilty in January to colluding with other drug makers

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<v Speaker 1>to fix prices. Why were the charges limited to two executives. Well,

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<v Speaker 1>this is a this is a from what I understand,

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<v Speaker 1>from what I've read it, it's a fairly small company

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<v Speaker 1>and it was primarily these two executives, which were brothers

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<v Speaker 1>in law, they were the CEO and the president, that

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<v Speaker 1>the scheme was really they perpetrated, perpetuted it, that it

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<v Speaker 1>was their plan, and that they were sort of the

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<v Speaker 1>ring leaders in pulling in some of these other companies. Um,

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<v Speaker 1>it doesn't mean the heritage itself won't get fined. You know,

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<v Speaker 1>this is still ongoing. But what looks like happened with

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<v Speaker 1>those executives June is that they might be seeking leniency.

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<v Speaker 1>In other words, they come in and they tell the

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<v Speaker 1>Department of Justice everything they want to hear. They're basically

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<v Speaker 1>whistleblowers and will cooperate with you and will throw in

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<v Speaker 1>tell you everybody else who was involved with this if

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<v Speaker 1>you give us light nes light prison sentences. So it

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<v Speaker 1>seems like that's what they're doing. Well, let's talk a

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<v Speaker 1>bit given the possibility of punishments and civil penalties that

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<v Speaker 1>we're talking about here about kind of this, the magnitude

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<v Speaker 1>of what these companies are facing, What what kinds you know,

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<v Speaker 1>what kind of money and criminal penalties do we think,

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<v Speaker 1>knowing what we know now, are really at stake here

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<v Speaker 1>for these drug companies and their executives. You know, I

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<v Speaker 1>think that it could be quite a bit the finds.

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<v Speaker 1>There's that there are guidelines as to how to calculate

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<v Speaker 1>the fines in these kinds of situations. But it's going

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<v Speaker 1>to depend, Michael on the d J finds ultimately and

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<v Speaker 1>how many drugs were involved, with the sales of those

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<v Speaker 1>drugs were and how many companies were involved. But it's

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<v Speaker 1>not inconceivable that it would get into the high millions

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<v Speaker 1>or even into the billions. If you look at some

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<v Speaker 1>of the past fines for cartel conduct, price fixing conduct.

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<v Speaker 1>We have gotten into the billions recently when relation to

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<v Speaker 1>foreign exchange UM benchmark rigging, we've got almost into the

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<v Speaker 1>millions in nine when there is a conspiracy related to

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<v Speaker 1>vitamins UM. You know, so those fines can get up there.

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<v Speaker 1>But you also have to think about the fact that

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<v Speaker 1>Connecticut and thirty nine other states have brought a lawsuit.

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<v Speaker 1>They are seeking what's called disgorgement, which is giving up

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<v Speaker 1>the the ill gotten gains, these illegal gains. On top

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<v Speaker 1>of it, you have the private suits, and what the

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<v Speaker 1>private suits will seek to do is look at the overcharges.

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<v Speaker 1>In some cases, we're hearing that these drugs were overpriced

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<v Speaker 1>by a thousand percent and then they will seek triple

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<v Speaker 1>damages for those overcharges. So all in all, we're in

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<v Speaker 1>the billions. Does it since there are so many companies implicated,

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<v Speaker 1>does it indicate to you that there has to be

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<v Speaker 1>something on emails or texts or computers, that there has

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<v Speaker 1>to be something in writing, because all of this being

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<v Speaker 1>done on the phone seems unlikely. You know, it seems

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<v Speaker 1>that if there is this very compelling evidence that Connecticut

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<v Speaker 1>says they have of a conspiracy, it's likely that there's

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<v Speaker 1>something in writing. I don't know that you'd call it compelling.

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<v Speaker 1>In this you had a very good evidence of an agreement.

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<v Speaker 1>But what they're also saying here is that these executives

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<v Speaker 1>actually met quite a bit publicly, that they often attended

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<v Speaker 1>together industry conferences, trade shows, and even had social events

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<v Speaker 1>where they all got together, including a girl's night out

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<v Speaker 1>for the female sales representatives. Well, get given again. You

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<v Speaker 1>said that this is at the beginning of and you know,

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<v Speaker 1>don't know whether those events are still going on, but

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<v Speaker 1>certainly the investigations in the lawsuits are. You know, what

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<v Speaker 1>kind of time frame can people expect um before we

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<v Speaker 1>start seeing some kind of resolution of this besides just

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<v Speaker 1>a couple of guilty please here and there. I expect

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<v Speaker 1>that we will see more fines, guilty please, et cetera.

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<v Speaker 1>In two thousand seventeen coming out of the DJ and

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<v Speaker 1>it wouldn't surprise me if that dragged on for another

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<v Speaker 1>couple of years. On the private cases, some of them

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<v Speaker 1>are still just getting filed. We had a new case

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<v Speaker 1>filed yesterday. Uh they started in March two th sixteen.

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<v Speaker 1>That that could go on for years. It could go

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<v Speaker 1>on for five years, six years. The Connecticut suit probably

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<v Speaker 1>not as long. I suspect that that will go on

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<v Speaker 1>for a few years. Does this have any connection to

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<v Speaker 1>President Trump tweeted on Tuesday that he's working on a

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<v Speaker 1>new system where there will be competition in the drug industry.

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<v Speaker 1>Is he talking about generic drugs or is he talking

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<v Speaker 1>about uh, prescription pharmaceutical drugs. I you know, I can't say.

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<v Speaker 1>I suspect he's probably talking about all of them. He's

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<v Speaker 1>just probably talking about drug pricing generally. But I will

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<v Speaker 1>say that, you know, before President Trump and President Obama

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<v Speaker 1>was still our president, that this was an issue, a

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<v Speaker 1>big issue you know, for Senate for the Obama administration.

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<v Speaker 1>Bernie Sanders as you said, was on top of it

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<v Speaker 1>um and I think it continues to be an issue

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<v Speaker 1>now with the Trump administration. So I don't see any

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<v Speaker 1>easing up at all on any of these drug companies

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<v Speaker 1>in relation to their drug pricing. That's that's amazing, exceeding

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<v Speaker 1>a thousand percent in a short time. Thank you so much,

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<v Speaker 1>as always for being on Bloomberg Law. That's Bloomberg Intelligence,

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<v Speaker 1>Senior litigation analyst, Jennifer Ree. To read more of Jennifer's analysis,

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<v Speaker 1>go to b I go on the Bloomberg terminal