On July 23, 2020, the U.S. Department of Justice, Antitrust Division (“DOJ”) announced charges against Taro Pharmaceuticals U.S.A., Inc. as part of an ongoing federal antitrust investigation of price fixing, bid rigging, and market allocation in the generic drug market. Taro is the sixth company charged in the investigation, five of which (including Taro) have admitted guilt and agreed to pay criminal penalties in the collective amount of more than $426 million.
Taro—like the other five companies that have admitted guilt—has entered into a deferred prosecution agreement (“DPA”) with DOJ. Under the DPA, Taro has agreed to pay a $205.6 million criminal penalty and cooperate fully with the ongoing investigation. That penalty is even more severe than the $195 million criminal penalty that generic pharmaceutical company Sandoz Inc. agreed to pay in March as part of a DPA to resolve charges arising from the same investigation. At that time, DOJ called the Sandoz fine “the largest for a domestic antitrust case.”
The charges against Taro come several months after DOJ indicted Taro’s former vice president of sales and marketing, Ara Aprahamian, for allegedly conspiring with Taro and others to fix prices, rig bids, and allocate customers (in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1), as well as making false statements to federal agents. Aprahamian, who was the third pharmaceutical executive charged for participation in the generic drug conspiracies, has not admitted wrongdoing and awaits trial.
The ongoing antitrust investigation into the generic drug market appears to be massive, reportedly including more than 16 companies and 300 generic drugs. New charges have been announced every few weeks or so for the past several months. The investigation’s scope matches the scope of the alleged wrongdoing, which one law enforcement official has called the “largest cartel in the history of the United States.” DOJ has been coordinating its investigation with the U.S. Postal Service Office of the Inspector General, the Federal Bureau of Investigation (“FBI”) and U.S. Attorney for the Eastern District of Pennsylvania. In addition, state attorneys general have taken an active role, with 20 of them filing a price-fixing lawsuit in 2016 against six generic drug companies that has since transformed into a large multi-district litigation that includes private class-action plaintiffs as well.
Criminal antitrust charges are likely to continue. Given the reported scope of the investigation and the fact that most companies and individuals charged to date have agreed to cooperate with the Government, they likely are providing evidence of alleged wrongdoing by other industry players. Even generic drug companies that are not direct competitors of the charged companies (i.e., they sell different generic drugs that are not substitutes for the drugs sold by the charged companies) should be aware that the investigation may expand into adjacent product markets. One factor that may assist DOJ in the expansion of the investigation is the potential availability of “amnesty plus” for companies that are ineligible for amnesty in the original investigation (because only the first company qualifies) but are able to cooperate regarding a different drug in an adjacent market. Because of this dynamic, companies that learn of investigations involving competitors should consider engaging counsel to plan for responding to DOJ inquiries and to bolster their antitrust compliance efforts.