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The Department of Justice has filed its first charges in a price collusion case against generic pharmaceutical manufacturers.
The Department of Justice (DoJ) has filed its first charges in a price collusion case against generic pharmaceutical manufacturers. On December 14, 2016, two former executives of Heritage Pharmaceuticals, Jeffrey Glazer and Jason Malek, were charged with conspiring with other generic drug manufacturers to coordinate price increases. They are the first to be charged in this two year long investigation.
The DoJ is looking at a dozen companies, including Mylan (NASDAQ:MYL), Teva (NYSE:TEVA) and Mayne Pharma (ASX:MYX). The issue? Whether generic manufacturers coordinated their price hikes for 24 drugs—among them an antibiotic and heart treatment.
As mentioned above, the investigation has been ongoing for two years. But last month, news broke that charges could be filed by year-end and additional information was revealed, showing just how far-reaching the investigation is.
That triggered major stock movement. Companies named in the investigation sank: in fact, by close of trading that same day, Mylan and Teva were down close to ten percent. Lannett (NYSE:LCI), another company named in the investigation, saw its stock sink 26.6 percent.
Following today’s development, first reported by Bloomberg, stocks of Teva and Mylan are down over two percent. Lannet’s stock has fallen by three percent.
Still, not every company named in the investigation is likely to face charges. As Bloomberg’s Caroline Chen explains, “The justice department goes and subpoenas a large number of companies when they are trying to find out information about others.” She notes that the DoJ has cast “a wide net” in the hopes of finding evidence against other drug makers.
And apparently, it worked. Are the charges against Heritage Pharmaceuticals’ former execs the first and last to be filed these year? Or will the DoJ come out with more names before the ball drops in Times Square?
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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.
