Generic drug companies are facing a sweeping federal criminal investigation into possible price fixing, and the consequences could be serious. According to a document filed in court, prosecutors are examining the prices of skin treatments made by Parago and a handful of other companies. For more than two years, the Justice Department has been looking at the pricing of generic
medicines made by about a dozen companies. Price hikes and generic drugs were also the subject of congressional hearings, lawsuits brought by consumers and state attorneys general, and a problem Senator Bernie Sanders has been fighting before the presidential campaign and during it. People cannot afford the medicine they need. Five major drug companies make fifty billion dollars in profits last year, joining us as Bloomberg Intelligence senior litigation analyst
to Jennifer ree Jenner, this letter is interesting. It asked the judge to pause discovery in some civil suits. Why is the government doing that? Well, you know what you have happening here with which often happens when there's a d J in a Department of Justice investigation, especially of price fixing, is that they have this ongoing investigation. They may already be talking to certain executives or companies about
putting in guilty, please about paying a fine. And when the private litigation that follows it gets started, oftentimes the plaintiffs will seek the documents that have already been turned over to the d o J did to get them quickly and get going. And they it's called discovery, which which plaintiffs and defendants gonna ask for in a private litigation. And the Department of Justice is worried that when that starts to happen, it's going to mess up and interfere
with their process. And they're simply saying, look, just just hold off, because we have this process process going. You can get this case started, but let us finish what we're doing here first. Well, presumably this is also fairly complicated, this scheme, And so what could you outline for us, you know, to the extent we know, we've got criminal investigations, we have private law scuds, we have attorney generals and all we have all sorts of things, all sorts of
ways in which is being looked at legally. Kind of one are the contours of the kind of price fixing scheme we're talking about here. Well, this is all really even though these investigations you mentioned have been ongoing since sometime late two thousand fourteen or mid two thousand fourteen, it's actually in a weird way still kind of at
the beginning. Um, it seems like we've had an investigation by Connecticut and an investigation by the Department of Justice, and it seems like, at least out of Connecticut's investigation, we have a statement that they have seen evidence of what they call a widespread conspiracy involving many companies and many drugs, and their investigation, by the way, is ongoing as well. So, Michael, it does seem complicated. It seems like it involves a lot of companies, It seems like
it involves a lot of drugs and ongoing. Now you have private cases brought against about twenty seven different companies that implicate about fourteen different drugs. Two former Heritage executives pleaded guilty in January to colluding with other drug makers
to fix prices. Why were the charges limited to two executives. Well, this is a this is a from what I understand, from what I've read it, it's a fairly small company and it was primarily these two executives, which were brothers in law, they were the CEO and the president, that the scheme was really they perpetrated, perpetuted it, that it was their plan, and that they were sort of the ring leaders in pulling in some of these other companies. Um,
it doesn't mean the heritage itself won't get fined. You know, this is still ongoing. But what looks like happened with those executives June is that they might be seeking leniency. In other words, they come in and they tell the Department of Justice everything they want to hear. They're basically whistleblowers and will cooperate with you and will throw in tell you everybody else who was involved with this if you give us light nes light prison sentences. So it
seems like that's what they're doing. Well, let's talk a bit given the possibility of punishments and civil penalties that we're talking about here about kind of this, the magnitude of what these companies are facing, What what kinds you know, what kind of money and criminal penalties do we think, knowing what we know now, are really at stake here for these drug companies and their executives. You know, I think that it could be quite a bit the finds.
There's that there are guidelines as to how to calculate the fines in these kinds of situations. But it's going to depend, Michael on the d J finds ultimately and how many drugs were involved, with the sales of those drugs were and how many companies were involved. But it's not inconceivable that it would get into the high millions or even into the billions. If you look at some of the past fines for cartel conduct, price fixing conduct.
We have gotten into the billions recently when relation to foreign exchange UM benchmark rigging, we've got almost into the millions in nine when there is a conspiracy related to vitamins UM. You know, so those fines can get up there. But you also have to think about the fact that Connecticut and thirty nine other states have brought a lawsuit. They are seeking what's called disgorgement, which is giving up
the the ill gotten gains, these illegal gains. On top of it, you have the private suits, and what the private suits will seek to do is look at the overcharges. In some cases, we're hearing that these drugs were overpriced by a thousand percent and then they will seek triple damages for those overcharges. So all in all, we're in
the billions. Does it since there are so many companies implicated, does it indicate to you that there has to be something on emails or texts or computers, that there has to be something in writing, because all of this being done on the phone seems unlikely. You know, it seems that if there is this very compelling evidence that Connecticut says they have of a conspiracy, it's likely that there's something in writing. I don't know that you'd call it compelling.
In this you had a very good evidence of an agreement. But what they're also saying here is that these executives actually met quite a bit publicly, that they often attended together industry conferences, trade shows, and even had social events where they all got together, including a girl's night out for the female sales representatives. Well, get given again. You said that this is at the beginning of and you know, don't know whether those events are still going on, but
certainly the investigations in the lawsuits are. You know, what kind of time frame can people expect um before we start seeing some kind of resolution of this besides just a couple of guilty please here and there. I expect that we will see more fines, guilty please, et cetera. In two thousand seventeen coming out of the DJ and it wouldn't surprise me if that dragged on for another couple of years. On the private cases, some of them are still just getting filed. We had a new case
filed yesterday. Uh they started in March two th sixteen. That that could go on for years. It could go on for five years, six years. The Connecticut suit probably not as long. I suspect that that will go on for a few years. Does this have any connection to President Trump tweeted on Tuesday that he's working on a new system where there will be competition in the drug industry. Is he talking about generic drugs or is he talking about uh, prescription pharmaceutical drugs. I you know, I can't say.
I suspect he's probably talking about all of them. He's just probably talking about drug pricing generally. But I will say that, you know, before President Trump and President Obama was still our president, that this was an issue, a big issue you know, for Senate for the Obama administration. Bernie Sanders as you said, was on top of it um and I think it continues to be an issue now with the Trump administration. So I don't see any easing up at all on any of these drug companies
in relation to their drug pricing. That's that's amazing, exceeding a thousand percent in a short time. Thank you so much, as always for being on Bloomberg Law. That's Bloomberg Intelligence, Senior litigation analyst, Jennifer Ree. To read more of Jennifer's analysis, go to b I go on the Bloomberg terminal