Speaker 1: Generic drug companies are facing a sweeping federal criminal investigation
Speaker 1: into possible price fixing, and the consequences could be serious.
Speaker 1: According to a document filed in court, prosecutors are examining
Speaker 1: the prices of skin treatments made by Parago and a
Speaker 1: handful of other companies. For more than two years, the
Speaker 1: Justice Department has been looking at the pricing of generic
Speaker 1: medicines made by about a dozen companies. Price hikes and
Speaker 1: generic drugs were also the subject of congressional hearings, lawsuits
Speaker 1: brought by consumers and state attorneys general, and a problem
Speaker 1: Senator Bernie Sanders has been fighting before the presidential campaign
Speaker 1: and during it. People cannot afford the medicine they need.
Speaker 1: Five major drug companies make fifty billion dollars in profits
Speaker 1: last year, joining us as Bloomberg Intelligence senior litigation analyst
Speaker 1: to Jennifer ree Jenner, this letter is interesting. It asked
Speaker 1: the judge to pause discovery in some civil suits. Why
Speaker 1: is the government doing that? Well, you know what you
Speaker 1: have happening here with which often happens when there's a
Speaker 1: d J in a Department of Justice investigation, especially of
Speaker 1: price fixing, is that they have this ongoing investigation. They
Speaker 1: may already be talking to certain executives or companies about
Speaker 1: putting in guilty, please about paying a fine. And when
Speaker 1: the private litigation that follows it gets started, oftentimes the
Speaker 1: plaintiffs will seek the documents that have already been turned
Speaker 1: over to the d o J did to get them
Speaker 1: quickly and get going. And they it's called discovery, which
Speaker 1: which plaintiffs and defendants gonna ask for in a private litigation.
Speaker 1: And the Department of Justice is worried that when that
Speaker 1: starts to happen, it's going to mess up and interfere
Speaker 1: with their process. And they're simply saying, look, just just
Speaker 1: hold off, because we have this process process going. You
Speaker 1: can get this case started, but let us finish what
Speaker 1: we're doing here first. Well, presumably this is also fairly complicated,
Speaker 1: this scheme, And so what could you outline for us,
Speaker 1: you know, to the extent we know, we've got criminal investigations,
Speaker 1: we have private law scuds, we have attorney generals and
Speaker 1: all we have all sorts of things, all sorts of
Speaker 1: ways in which is being looked at legally. Kind of
Speaker 1: one are the contours of the kind of price fixing
Speaker 1: scheme we're talking about here. Well, this is all really
Speaker 1: even though these investigations you mentioned have been ongoing since
Speaker 1: sometime late two thousand fourteen or mid two thousand fourteen,
Speaker 1: it's actually in a weird way still kind of at
Speaker 1: the beginning. Um, it seems like we've had an investigation
Speaker 1: by Connecticut and an investigation by the Department of Justice,
Speaker 1: and it seems like, at least out of Connecticut's investigation,
Speaker 1: we have a statement that they have seen evidence of
Speaker 1: what they call a widespread conspiracy involving many companies and
Speaker 1: many drugs, and their investigation, by the way, is ongoing
Speaker 1: as well. So, Michael, it does seem complicated. It seems
Speaker 1: like it involves a lot of companies, It seems like
Speaker 1: it involves a lot of drugs and ongoing. Now you
Speaker 1: have private cases brought against about twenty seven different companies
Speaker 1: that implicate about fourteen different drugs. Two former Heritage executives
Speaker 1: pleaded guilty in January to colluding with other drug makers
Speaker 1: to fix prices. Why were the charges limited to two executives. Well,
Speaker 1: this is a this is a from what I understand,
Speaker 1: from what I've read it, it's a fairly small company
Speaker 1: and it was primarily these two executives, which were brothers
Speaker 1: in law, they were the CEO and the president, that
Speaker 1: the scheme was really they perpetrated, perpetuted it, that it
Speaker 1: was their plan, and that they were sort of the
Speaker 1: ring leaders in pulling in some of these other companies. Um,
Speaker 1: it doesn't mean the heritage itself won't get fined. You know,
Speaker 1: this is still ongoing. But what looks like happened with
Speaker 1: those executives June is that they might be seeking leniency.
Speaker 1: In other words, they come in and they tell the
Speaker 1: Department of Justice everything they want to hear. They're basically
Speaker 1: whistleblowers and will cooperate with you and will throw in
Speaker 1: tell you everybody else who was involved with this if
Speaker 1: you give us light nes light prison sentences. So it
Speaker 1: seems like that's what they're doing. Well, let's talk a
Speaker 1: bit given the possibility of punishments and civil penalties that
Speaker 1: we're talking about here about kind of this, the magnitude
Speaker 1: of what these companies are facing, What what kinds you know,
Speaker 1: what kind of money and criminal penalties do we think,
Speaker 1: knowing what we know now, are really at stake here
Speaker 1: for these drug companies and their executives. You know, I
Speaker 1: think that it could be quite a bit the finds.
Speaker 1: There's that there are guidelines as to how to calculate
Speaker 1: the fines in these kinds of situations. But it's going
Speaker 1: to depend, Michael on the d J finds ultimately and
Speaker 1: how many drugs were involved, with the sales of those
Speaker 1: drugs were and how many companies were involved. But it's
Speaker 1: not inconceivable that it would get into the high millions
Speaker 1: or even into the billions. If you look at some
Speaker 1: of the past fines for cartel conduct, price fixing conduct.
Speaker 1: We have gotten into the billions recently when relation to
Speaker 1: foreign exchange UM benchmark rigging, we've got almost into the
Speaker 1: millions in nine when there is a conspiracy related to
Speaker 1: vitamins UM. You know, so those fines can get up there.
Speaker 1: But you also have to think about the fact that
Speaker 1: Connecticut and thirty nine other states have brought a lawsuit.
Speaker 1: They are seeking what's called disgorgement, which is giving up
Speaker 1: the the ill gotten gains, these illegal gains. On top
Speaker 1: of it, you have the private suits, and what the
Speaker 1: private suits will seek to do is look at the overcharges.
Speaker 1: In some cases, we're hearing that these drugs were overpriced
Speaker 1: by a thousand percent and then they will seek triple
Speaker 1: damages for those overcharges. So all in all, we're in
Speaker 1: the billions. Does it since there are so many companies implicated,
Speaker 1: does it indicate to you that there has to be
Speaker 1: something on emails or texts or computers, that there has
Speaker 1: to be something in writing, because all of this being
Speaker 1: done on the phone seems unlikely. You know, it seems
Speaker 1: that if there is this very compelling evidence that Connecticut
Speaker 1: says they have of a conspiracy, it's likely that there's
Speaker 1: something in writing. I don't know that you'd call it compelling.
Speaker 1: In this you had a very good evidence of an agreement.
Speaker 1: But what they're also saying here is that these executives
Speaker 1: actually met quite a bit publicly, that they often attended
Speaker 1: together industry conferences, trade shows, and even had social events
Speaker 1: where they all got together, including a girl's night out
Speaker 1: for the female sales representatives. Well, get given again. You
Speaker 1: said that this is at the beginning of and you know,
Speaker 1: don't know whether those events are still going on, but
Speaker 1: certainly the investigations in the lawsuits are. You know, what
Speaker 1: kind of time frame can people expect um before we
Speaker 1: start seeing some kind of resolution of this besides just
Speaker 1: a couple of guilty please here and there. I expect
Speaker 1: that we will see more fines, guilty please, et cetera.
Speaker 1: In two thousand seventeen coming out of the DJ and
Speaker 1: it wouldn't surprise me if that dragged on for another
Speaker 1: couple of years. On the private cases, some of them
Speaker 1: are still just getting filed. We had a new case
Speaker 1: filed yesterday. Uh they started in March two th sixteen.
Speaker 1: That that could go on for years. It could go
Speaker 1: on for five years, six years. The Connecticut suit probably
Speaker 1: not as long. I suspect that that will go on
Speaker 1: for a few years. Does this have any connection to
Speaker 1: President Trump tweeted on Tuesday that he's working on a
Speaker 1: new system where there will be competition in the drug industry.
Speaker 1: Is he talking about generic drugs or is he talking
Speaker 1: about uh, prescription pharmaceutical drugs. I you know, I can't say.
Speaker 1: I suspect he's probably talking about all of them. He's
Speaker 1: just probably talking about drug pricing generally. But I will
Speaker 1: say that, you know, before President Trump and President Obama
Speaker 1: was still our president, that this was an issue, a
Speaker 1: big issue you know, for Senate for the Obama administration.
Speaker 1: Bernie Sanders as you said, was on top of it
Speaker 1: um and I think it continues to be an issue
Speaker 1: now with the Trump administration. So I don't see any
Speaker 1: easing up at all on any of these drug companies
Speaker 1: in relation to their drug pricing. That's that's amazing, exceeding
Speaker 1: a thousand percent in a short time. Thank you so much,
Speaker 1: as always for being on Bloomberg Law. That's Bloomberg Intelligence,
Speaker 1: Senior litigation analyst, Jennifer Ree. To read more of Jennifer's analysis,
Speaker 1: go to b I go on the Bloomberg terminal