As evidence mounts that Canadian drug companies were involved in fixing prices on key drugs, two major players have disclosed massive settlements to regulators.
Barry Sherman, founder of Canada’s largest pharmaceutical company, paid $100 million on Wednesday to U.S. and Canadian regulators, acknowledging he facilitated illegal conduct at his company by facilitating meetings and emails among drug manufacturers and pharmacies. Two other Canadian companies have also paid hundreds of millions in settlements in recent months to backstop investigations.
The probe by the federal government in Canada found that executives at the smaller companies involved in collusion with Apotex Inc. played on Sherman’s inexperience, with one underling even ridiculing his corporate relationship with the company as “crap.”
“Mr. Sherman believed that if he wanted to be taken seriously by executives at other Canadian pharmaceutical companies, that he had to treat them as equals,” the U.S. Department of Justice said in a statement on the case.
The investigations into pharmaceutical price fixing in Canada stemmed from their goal of attracting investors to invest in a new business model – the so-called “prescription portal” approach. The approaches involved arranging meetings with new investors by directing patients to websites owned by the companies and setting up product sampling. The pharmaceutical executives working on the projects agreed not to lower prices for the over-the-counter versions of a drug or to lower prices for a more expensive dosage.
Three Apotex executives, including the former head of marketing, signed plea agreements on Wednesday as part of the case against the company. Those executives admitted to pricing practices in the United States but not Canadian officials.
The Canadian Securities Commission said earlier this year that it found evidence of U.S. subsidiaries of Canada’s largest drugmaker also playing a role in settling the price-fixing issue, and both Apotex and Apotex agreed to cooperate with the U.S. government.
Industry participants have said Canadian drug manufacturers were making hefty profits at a time when the cost of some drugs had soared, and they feared the cost would eventually make the markets less competitive.
Apotex agreed to pay a $75 million fine to the U.S. Department of Justice. It also paid an additional $25 million fine to regulators in British Columbia, where Apotex has a distribution center, to avoid possible prosecution for price-fixing.
The company initially tried to hide the scale of the schemes, according to court filings, but admitted to other activities in a filing with the Department of Justice earlier this year. The Canadian Securities Commission said Apotex’s aggressive pricing practices caused public, private and for-profit patient portals to mislead users about the prices charged for various versions of a drug.
Sherman and co-founder Irwin Schwartz founded Apotex in 1984 as an Asian manufacturer of injectable products. In 1988, when the company was still based in Toronto, it set up a U.S. subsidiary based in Dallas.
While the main marketing office of Apotex LLC is in Dallas, Apotex Inc. actually operates in Toronto.
Sherman stepped down from the role of chief executive about 18 months ago after decades as the driving force behind the company.
Last month, Aphria Inc., the Canadian marijuana company founded by comedian and entertainer Wayne Gretzky, agreed to pay $245 million to Canadian and U.S. regulators to settle allegations it colluded with another Canadian company on dealing with suppliers.
Teva Pharmaceutical, the Israeli drug company that became embroiled in a massive lawsuit with Pfizer years ago, recently paid $280 million to settle similar allegations.
All three Canadian companies insisted on their innocence in the investigation.
Sherman’s wife, Honey, said she is saddened by the outcome.
“While I do not condone any form of collusion, it does not prevent me from continuing to be proud of my family’s long legacy of supporting research in life-saving health products for communities around the world,” she said in a statement.