December 14, 2016 / 5:34 PM / 8 months ago

U.S. files first charges in generic drug price-fixing probe

WASHINGTON (Reuters) - The U.S. Department of Justice accused two former generic pharmaceutical executives on Wednesday of colluding with other generic manufacturers to fix prices, the first criminal charges stemming from a two-year investigation.

The two men are in talks with the government about a plea agreement, according to a source close to the negotiations who was not authorized to discuss the matter.

The executives, Jeffrey Glazer and Jason Malek, were charged in Philadelphia with conspiring to fix the prices of an antibiotic, doxycycline hyclate, and to split up the market for glyburide, a diabetes drug, the Justice Department said.

Their former employer, Heritage Pharmaceuticals, filed a lawsuit against them in August, saying in a complaint they were behind a "brazen theft" and "looted tens of millions of dollars from Heritage by misappropriating its business opportunities, fraudulently obtaining compensation for themselves, and embezzling its intellectual property."

Glazer and Malek were not immediately reachable, and their attorneys did not respond to a request for comment.

Generic drug pricing became an issue in 2014, driven in large part by media reports of rising drug prices.

In 2014, U.S. Senator Bernie Sanders and Maryland Representative Elijah Cummings launched their own probe into skyrocketing generic prices. They sent 17 letters to companies to inquire about price increases for 10 drugs.

According to the FDA's website, Heritage makes extended release doxycycline hyclate. Other makers include Mylan NV, Actavis, now owned by Teva Pharmaceuticals Inc, Mayne Pharma Group and Prinston Pharma.

Heritage also makes glyburide tablets, which are also made by Pharmadax, Teva and Zydus. Heritage makes glyburide with metformin hydrochloride, as do Aurobindo, Impax, Zydus, Corepharma and Teva, according to the website.

Other generic drugmakers have disclosed they received subpoenas in connection to the Justice probe or have been previously reported to have been included in the antitrust probe.

Heritage was among the companies that received a congressional inquiry over its pricing for doxycycline hyclate.

Other companies in the congressional probe have since publicly disclosed receiving subpoenas, including Mylan NV, Allergan, which later sold its generics business to Teva, Lannett Co, Impax Laboratories, Par Pharmaceuticals, which is owned by Endo Pharmaceuticals, Sun Pharmaceutical Industries, Taro Pharmaceuticals Ltd and Mayne, which purchased a portfolio of drugs from Allergan and Teva.

Shares of generic drugmakers including Mylan, Endo and Teva tumbled after Bloomberg first reported that charges had been filed and included those names.

Additional reporting by Ankur Banerjee in Bengaluru, Sarah N. Lynch in Washington and Caroline Humer in New York; Editing by Bernard Orr and Peter Cooney

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