On 14 December, after a two-year investigation into price collusion among generic drug makers, two former Heritage Pharmaceuticals executives were accused by federal authorities for conspiring with rivals to fix prices for a widely-used antibiotic and a diabetes treatment.

Jeffery Glazer, the CEO and Jason Malek, the former president - and brother-in-law of Glazer- allegedly worked with other generic drug makers to set the market for doxycycline hyclate, an antibiotic and glyburide, a diabetes treatment, according to documents filed in federal court in Philadelphia.

The price collusion mainly occurred between 2013 and 2015, involving "communications with co-conspirators," the documents noted.

“These two executives sought to enrich themselves at the expense of sick and vulnerable individuals who rely upon access to generic pharmaceuticals as a more affordable alternative to brand-name medicines,” Deputy Assistant Attorney General Brent Snyder said.

The charges also does not specify how many other companies or executives the Justice Department believes were involved. However, some drug makers have disclosed receiving subpoenas during the investigation, including Mylan Pharmaceuticals; Teva Pharmaceutical; Actavis, which Teva bought from Allergan; Lannett Co., Impax Laboratories; Sun Pharmaceutical; Endo International’s Par subsidiary; and Taro Pharmaceutical. All companies are cooperating with the investigation.

Heritage files suit against Glazer-Malek duo

Separately, last November, Heritage filed a racketeering lawsuit against Glazer and Malek, on the basis of "a long-running criminal conspiracy that severely damaged Heritage." They had also "looted tens of millions of dollars from Heritage by misappropriating its business opportunities, fraudulently obtaining compensation for themselves, and embezzling its intellectual property," over a seven-year period before being fired in August, according to court documents.

Heritage claimed that the duo made arrangements for the company to sell discounted drugs to at least five of their dummy corporations, which then sold the drugs to Heritage customers at market prices, siphoning off Heritage's profits.

"This resale scheme ultimately redirected more than USD$9 million in Heritage sales to Dorado Pharma (a dummy company) from 2012 to 2015," the lawsuit stated.

In a statement, the company said it is "fully cooperating with all aspects of the Department of Justice's continuing investigation" and is "deeply disappointed by the misconduct and are committed to ensuring it does not happen again."

Intellectual property that forms company’s core also stolen

Heritage also claimed that the duo stole intellectual property by transferring to Dorado, the ownership of abbreviated new drug applications (ANDAs), which must be filed with the FDA for regulatory approval.

"These ANDAs form the core of Heritage's business and are its most valuable assets," the lawsuit stated.

The investigation brought about heightened concern over the cost of prescription medicines, and in particular, the rising prices of some generics. However, this is a recurring problem.

In mid-2014, an analysis discovered that half of all generics sold through retailers had increased in price in the previous year. Pharmacies paid more than double for one out of 11 generics, and in a few cases, the cost not only increased 1,000%, but even topped 17,000%.

The analysis prompted Senator Bernie Sanders and Representative Elijah Cummings to launch another investigation and pursue hearings - but their efforts did not meet intended expectations as manufacturers declined to testify. Heritage was one of the targeted companies. The issue then snowballed into a larger issue of increased costs for brand-name drugs that came under national spotlight around the same time.

Federal investigations into other pharmaceutical companies

"Pharmaceutical executives must be held accountable for ripping off the American people by charging them the highest prices in the world for prescription drugs," Sanders said in a statement. "At a time when one out of five Americans cannot afford the medication they need, we must do everything we can to end the greed and illegal behaviour of the drug makers. Fraud can no longer be an acceptable business model for the pharmaceutical industry.”

The price of doxycycline increased 8,000% from USD20 for 500 tablets to USD1,849 between October 2013 and May 2014, according to Senator Amy Klobuchar.

In November, Sanders and Cummings launched a federal investigation into three large insulin makers - Sanofi, Eli Lilly and Novo Nordisk - for collusion. They claimed that a pattern for insulin prices often rose in tandem over several years and expressed concern that the drug companies may have been collaborating to set their prices, driving up the cost for millions of Americans, including both patients and taxpayers. MIMS

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