Now the drugmakers are struggling with their response.
The digital ink wasn’t dry yesterday on my article on How PE Firms Are Flipping Drugs in Price-Gouging Scheme that Cannibalizes the Entire US Economy, when Bloomberg reported that US prosecutors “are bearing down” on “more than a dozen” drugmakers “in a sweeping criminal investigation into suspected price collusion.”
According to Bloomberg:
The antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, they said.
Among the drugmakers that have received subpoenas:
Mylan and Covis who are among our heroes in the prior article. Other companies tangled up in this include Teva Pharmaceutical, Actavis (which Teva bought from Allergan in August), Lannett, Impax Laboratories, Sun Pharmaceutical, Mayne Pharma Group, Endo International’s subsidiary Par Pharmaceutical Holdings, and Taro Pharmaceutical Industries.
“Though individual companies have made various disclosures about the inquiry, they have identified only a handful of drugs under scrutiny, including a heart treatment and an antibiotic,” Bloomberg says. Except for Covis, these companies said they’re “cooperating” with the investigation. Covis said it was unable to assess the outcome of the investigation.
What’s new is the sweeping nature of this grand jury investigation. And now the drugmakers are struggling with their response.
“Teva is not aware of any facts that would give rise to an exposure to the company with respect to these subpoenas,” a Teva spokeswoman told Bloomberg in an e-mail.
“To date, we know of no evidence that Mylan participated in price-fixing,” a Mylan spokeswoman told Bloomberg in an e-mail.
Other companies continue to stonewall, according to Bloomberg:
Mayne continues to cooperate with the Justice Department and believes the investigations will not have a material impact on its future earnings, the company said in a statement on Thursday.
Allergan, Impax, and Sun declined to comment beyond their filings. Representatives of Endo, Covis, Taro and Lannett didn’t respond to requests for comment. A Justice Department spokesman declined to comment.
Shares got crushed on Thursday after the news of the grand jury investigation leaked, though they’re now recovering some ground. Note how these shares have gotten slaughtered since their 52-week highs (in bold):
- Lannet plunged 27% yesterday and are now edging up 0.3%. But it’s down 61% from its 52-week high.
- Impax plunged 20% yesterday and at the moment recovered 5.8%. But it’s down 61% from its 52-week high.
- Endo plunged 19% yesterday and is now up 1.7%. But it’s down 76% from its 52-week high.
- Teva plunged 9.5% yesterday and is now up 1.9%. But it’s down 40% from its 52-week high.
- Allergan dropped 4.6% yesterday, now up 1.4%. But it’s down 40% from its 52-week high.
- Mylan dropped 6.9% yesterday and now is up 3.1%. But it’s down 36% from its 52-week high.
- Concordia, the Canadian company that bought the assets of Covis, fell 5.6% yesterday. Today, it’s down 0.7%. This is a true hero for its hapless investors. At the beginning of the year, shares were still trading at C$58.75. They’re now down 93% from their 52-week high, at C$4.34.
- Taro dropped 7.3% yesterday and today is up 1.8%. But it’s down 40% from its 52 week high.
- Mayne, an Australian drugmaker, plunged 15.4%. It was already Friday in Australia and there was no day left to recover. But at A$1.44, the stock is down 31.7% from its 52-week high and is close to becoming a penny stock.
The ravenous price increases that pharmaceutical companies slap on their medicines are part of the reason the US health care system is eating an ever larger slice of consumer, corporate, and government spending. Private equity firms have figured out how to muscle into that cash flow. Read… How PE Firms Are Flipping Drugs in Price-Gouging Scheme that Cannibalizes the Entire US Economy