Novartis' Sandoz To Pay $195M For Price-Fixing

Pharmaceutical giant Novartis AG's NVS subsidiary Sandoz Inc. has agreed to pay $195 million in penalties to avoid facing criminal charges in a price-fixing case, the Justice Department announced Monday.

What Happened

The New Jersey-based pharmaceutical company was charged with four felony counts in the United States District Court for the Eastern District of Pennsylvania on Monday.

Sandoz faces charges of colluding with four other generic drug companies between 2013 and 2015 to fix the prices for critical medication used to treat hypertension, cystic fibrosis, dermatitis, and other skin conditions.

"Today's resolution, with one of the largest manufacturers of generic drugs, is a significant step toward ensuring that prices for generic drugs are set by competition, not collusion, and rooting out antitrust crimes that cheated American purchasers of vital medicines," Assistant Attorney General Makan Delrahim of the Department of Justice's Antitrust Division said in a statement.

"Sandoz conspired for years with other manufacturers and their executives to raise prices for critical medications, and the Antitrust Division will continue its ongoing investigation to hold both individuals and corporations accountable for these crimes."

According to the Justice Department, Sandoz is the third company to have admitted to antitrust practices as part of its ongoing investigations into the generic pharmaceutical industry.

What's Next

The Justice Department and Sandoz have signed a "deferred prosecution agreement" to resolve the charges. If approved by the court, the agreement will mean that the prosecution would be deferred for three years, and subsequently, the charges will be dropped if Sandoz lives up to its end of the bargain.

In addition to paying the $195 million under the agreement, the largest ever penalty imposed in a domestic antitrust case, Sandoz has also agreed to cooperate with the department in its investigation of the generic pharmaceutical industry. The company admitted that the antitrust practices affected sales of more than $500 million.

Price Action

Novartis stock closed 3.47% higher at $86.87 per share in New York on Monday.