In the wake of a buying and selling frenzy, Irish drugmaker Allergan has been subpoenaed by the Department of Justice (DOJ) over antitrust concerns regarding the pricing of its generic drugs. Last week, the company announced a $40.5 billion selloff of its generics unit to the global generic market leader, Israeli-based Teva Pharmaceuticals. That deal comes after U.S.-based drug maker Actavis completed its estimated $66-$70.5 billion acquisition of Allergan, changing its name to the latter as well. Regardless of its official moniker, it is the Actavis unit within the Allergan umbrella that is under the most recent scrutiny, according to a regulatory filing that the company submitted to the Security and Exchange Commission (SEC) on Thursday. In the filing, Allergan admits that the DOJ is “seeking information relating to the marketing and pricing of certain of the company’s generic products and communications with competitors about such products.” Although competitors were not mentioned by name, drugmakers Lannett, Endo International, Par Pharmaceuticals, and Impax Laboratories have also recently made similar disclosures. Allergan’s Forest unit also received a subpoena on April 29th from the Department of Health and Human Services Inspector General’s office regarding price calculations for several of its products.
The recent disclosure widens the DOJ’s criminal probe into whether or not leading generic drug providers are colluding to artificially raise generic drug prices. According to data from the Centers for Medicare and Medicaid Services (CMS), more than half of all generic drug prices rose between June 2013 and June 2014, including 10 percent of all generic drugs doubling in price during that time. As the fourth largest generics producer in the world, at least prior to the Teva deal, Allergan is largest company to be involved in the DOJ investigation so far. The probe became public last November when Impax was served with several criminal grand jury subpoenas. Lannett announced in a regulatory filing earlier in the year that the company, as well as its senior vice-president of sales and marketing, was being served with grand jury subpoenas as well. Like Lannett, Allergan wrote that it intends to fully cooperate with the investigation. Neither the DOJ, nor the company would comment further on the investigation beyond the filings. While Allegan made no mention of the medicines involved in the suspected collusion, filings from other companies indicate that the heart drug digoxin and the antibiotic doxycycline are among those under investigation.Policy and Regulatory Report has cited sources close to the probe that the DOJ is also looking at “trade associations as part of their investigation as having been one potential avenue for facilitating the collusion between salespeople at different generic producers.”
It is unknown at the time if the investigation will affect Allegan’s sale of its generic portfolio to Teva in the wake of the antitrust probe, as that sale would give the latter company a sizeable advantage over all competitors. Pre-Actavis Allergan established itself after inventing the popular Botox treatment. In its current incarnation, Allergan has become extremely aggressive in shedding its generics market in order to acquire and focus on higher-end pharmaceuticals like Botox. In the wake of the Teva sale, Allergan CEO Brent Saunders indicated the company’s willingness to spend the proceeds saying, “We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company.” Some analysts such as Everscore ISI’s Umar Raffat believe that Teva will likely have to sell some of its generics line in order to avoid antitrust issues. As the DOJ investigation crawls up the ladder of company significance, it is also unknown whether or not Teva will become ensnared in the probe itself eventually.
Bloomberg Business – Doni Bloomfield and David McLaughlin
Fierce Pharma – Eric Palmer
Reuters – Anjali Rao Koppala