Two former New Jersey pharmaceutical executives pleaded guilty Monday to price fixing charges, delivering the first convictions in a wide-ranging Justice Department probe of alleged collusion among major players in the lower-cost drug market.
Jeffrey A. Glazer, ex-chief executive and chairman of Heritage Pharmaceuticals in Eatontown, Monmouth County, and Jason T. Malek, the company's former senior vice president of commercial operations, admitted to conspiring to manipulate prices of a popular antibiotic and a diabetes medication between April 2013 and December 2015.
Neither man would comment after brief hearings before U.S. District Judge R. Barclay Surrick in federal court in Philadelphia. Each faces up to 10 years in prison at sentencing hearings scheduled for April.
Glazer, 45, and Malek, 40, who are brothers-in-law, are believed to be cooperating with federal investigators as focus shifts to larger firms and what role they may have played in the antitrust scheme, according to sources familiar with the probe.
The guilty pleas added to a haze of uncertainty that has grown in the last year over the generic drug industry, a $75 billion market that accounts for about 88 percent of all prescriptions written in the United States.
Rising costs remain a leading concern for U.S. consumers, prompting multiple congressional investigations and pledges from politicians including President-elect Donald Trump and U.S. Sen. Bernie Sanders (I., Vt.) to address a recent spate of severe price hikes on certain drugs with little explanation by their manufacturers.
The day after Glazer and Malek were charged last month, Pennsylvania and 19 other states sued six leading generic drugmakers, including Heritage, alleging a widespread conspiracy to reduce competition and inflate prices.
The complaint, filed in federal court in Connecticut, painted a picture of a fraternity of industry executives that regularly met at conferences, over dinners and at cocktail parties to quietly strike deals on market share and pricing, in violation of antitrust rules.
Several companies named in the suit - including industry leaders Teva Pharmaceuticals USA in North Wales and Canonsburg-based Mylan Pharmaceuticals - also have disclosed that they have received Justice Department subpoenas and denied any wrongdoing.
Mylan suffered a swift public backlash earlier this year after it sharply hiked prices on EpiPen, though the severe-allergy treatment was not among the drugs at issue in the states' lawsuit.
Instead, the suit focused its price-fixing allegations on the same drugs at the center of the criminal case against the former Heritage executives: the generic antibiotic doxycycline hyclate and the diabetes drug glyburide.
In court Monday, prosecutors disclosed few details on how Glazer and Malek manipulated the drugs' prices, except to say that they also involved their superiors and subordinates in the conspiracy and that one of the also-implicated rival companies was based in eastern Pennsylvania.
The civil suit filed in Connecticut alleges that, before Heritage started producing doxycycline in 2013, it contacted Mylan, the only other company manufacturing the delayed-release version of the drug at the time.
Executives at Mylan agreed to abandon their doxycycline sales to one major pharmaceutical chain and a large wholesaler to allow Heritage to gain a foothold in the market, the suit alleges.
When a third firm entered the market the next year, its executives allegedly met with Heritage and Mylan officials to set prices and divvy up the market among all three firms, the lawsuit states.
During roughly the same period, the average market price of one often-used form of doxycycline rose from $20 for a bottle of 500 pills in October 2013 to $1,849 a bottle six months later, according to a 2014 congressional report.