DOJ Criminal Antitrust Settlements Involve Dollars, Donations, and Divestitures
On August 21, the U.S. Department of Justice (DOJ), Antitrust Division announced deferred prosecution agreements (DPAs) resolving criminal antitrust charges against Teva Pharmaceuticals USA Inc. (Teva) and Glenmark Pharmaceuticals Inc., USA (Glenmark). The DPAs are historic. For the first time ever, a DOJ antitrust criminal settlement requires divestiture from a line of business and a donation of the allegedly price-fixed products to a third party.
The charges against Teva and Glenmark resulted from DOJ’s broader criminal investigation into alleged price fixing by generic pharmaceutical companies. Teva and Glenmark were charged in 2020, and now represent the sixth and seventh companies to settle such charges with DOJ. Five other companies were charged in the investigation, all of which have entered deferred prosecution agreements. In addition, three individual executives have pleaded guilty, while another awaits trial.
To resolve the charges, Teva agreed to donate US$50 million in clotrimazole and tobramycin to humanitarian organizations. These drugs were among those allegedly subject to price fixing by Teva. Until last year, settlements requiring payments to third parties were prohibited by DOJ. But this policy was reversed in 2022, and DOJ published guidelines governing such practices to prevent abuse. Teva also agreed to pay US$225 million in criminal penalties. Glenmark agreed to pay US$30 million in criminal penalties.
Both companies agreed to divest their business lines for pravastatin, a drug that DOJ alleges was subject to price fixing by both companies. In DOJ’s press release, Jonathan Kanter, head of the Antitrust Division, noted the “extraordinary remedial measures that require the breakup of assets and restore competition to the industry.” While novel in the criminal context, this approach is consistent with prior comments from Kanter on the need for structural remedies, rather than behavioral remedies, in conduct cases.
Teva and Glenmark also agreed to cooperate with the department in the ongoing criminal investigation, implement compliance policies and procedures addressing antitrust violations, and report to DOJ regarding their antitrust compliance efforts.
These DPAs demonstrate that DOJ is continuing to expand its toolbox in resolving criminal antitrust cases. In recent years, the Antitrust Division has been more willing to consider DPAs where criminal convictions could result in undesired collateral consequences, such as removing medications from federal program (e.g., Medicare) eligibility. These DPAs reflect DOJ’s current focus on remediation and the Antitrust Division’s current focus on structural remedies. Here, to remedy the alleged anticompetitive conduct, DOJ is requiring the companies to sell some of the affected business lines. Companies considering criminal antitrust settlements with DOJ must be prepared not only to address past conduct, but also the competitive landscape going forward.
For questions about criminal antitrust issues or antitrust compliance, please reach out to the authors or any of their colleagues in Arnold & Porter’s Antitrust/Competition or White Collar Defense & Investigations practice groups.
© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.