Drug company agrees to pay $100 million in price-fixing investigation

Illustration by Stephen Fortune for the Washington Post

HIGHLANDS RANCH, Colo. — Barry M. Sherman’s publicly traded pharmaceutical company has agreed to pay $100 million to settle criminal and civil investigations into allegations that its employees committed price-fixing by trying to keep generic competitors out of the market.

The settlement, with the Justice Department, also provides for Apotex employees to testify before an undercover informant who was working for the Drug Enforcement Administration, according to a settlement agreement filed Thursday in federal court in Denver.

The agreement is based on the DEA’s confidential informant, who used a phony pharmaceutical company to seek a negotiating partner to join a group called the Canadian Pharmaceutical Alliance. But the informant was revealed to be an undercover employee of the DEA, and the Justice Department subsequently teamed up with prosecutors in both the U.S. and Canada to file charges against Apotex’s chief executive officer and other employees who had worked at the company.

The case marked the first time the Justice Department had teamed up with prosecutors in two different countries in order to bring price-fixing charges against the executives. Authorities in Canada sought similar charges after the DEA turned on Apotex as part of its investigation.

Sherman, who built Apotex into the largest privately held Canadian pharmaceutical company and the second-largest generic drug maker in the U.S., died in January of a massive heart attack that killed him at age 75.

At the time of his death, Sherman had complained about the government’s investigation of his company, which he insisted was in the right and that did not violate U.S. antitrust laws.

The Justice Department alleged that Apotex employees “participated in an illegal conspiracy with each other and with a dozen U.S. and Canadian health care distributors to prohibit members of the group from agreeing to pay or accept price reductions in the price of generic drugs.”

The company, however, said that it did not collude with the distributors.

Instead, Apotex said in a statement that the DEA made a “made-up” allegation.

“Apotex denies that it had any knowledge or involvement in, or did anything to lead to, this illegal, fraudulent scheme,” the company said. “The allegations were a fabrication crafted by the government after its undercover informant was outed for lying about having carried out a ‘routine inspection’ of Apotex’s operations and producing fake transactions that purported to be part of Apotex’s supply chain.”

The company’s practices, according to Apotex, have not changed under the new management and that the company doesn’t agree with how the DEA’s investigation has been handled.

The Canadian company’s chief executive, Gregory S. Risch, is now facing one count of wire fraud, according to the Canadian Food Inspection Agency. Other Apotex executives face charges of conspiracy and money laundering in a Canadian court case.

The Justice Department said the civil portion of the deal, worth about $58 million, will be overseen by the Foreign Corrupt Practices Act Compliance Committee of the Federal Trade Commission.

The U.S. District Court for the District of Colorado approved the settlement.

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