Canadian drug maker Apotex agrees to $100m settlement

Apotex has agreed to pay $100 million and to assist federal prosecutors in their criminal investigation of the Canadian drug maker accused of seeking to fix prices in the U.S.

The proposed settlement, which must be approved by a federal judge, would release Apotex from a lawsuit seeking more than $4bn in damages from the company. That suit is part of an ongoing federal investigation known as an antitrust action.

Apotex chief executive officer Joffrey Kerrest is scheduled to testify in that case on Tuesday.

The same court on Friday set an October 3 date for the next hearing in the Apotex suit.

Dow Jones reported the proposed settlement between Apotex and the U.S. Justice Department. Apotex is based in Mississauga, Ontario.

An Apotex statement issued late Monday said the company is cooperating with an investigation into certain of its past practices. “As has been acknowledged by others in the pharmaceutical industry, Apotex has made mistakes and committed costly errors in judgment,” the statement said. “Yet, as Apotex’s business has grown, this episode represents a few events over a decade ago that pale in comparison to what Apotex continues to accomplish.”

The Justice Department filed the lawsuit against Apotex, Kerrest and two other pharmacists last year. In it, the government accused the drugmaker of working with pharmacies to agree not to sell the company’s drugs at prices they considered to be unfair.

The probe began with talks conducted by the Iowa Board of Pharmacy, and then became the subject of a series of civil lawsuits filed by drug distributors and pharmacies in the U.S. A criminal probe was launched several years ago, and by the time of the original civil lawsuits was being led by FBI investigators who spoke to persons not named in the suit.

One of the pharmacies named in the suit was Crosby Drugs of Rockville, Maryland. That pharmacy, now known as Crosby Mygale Pharmacy, has settled its side of the suit for $5.75m.

Even after more than two years of court-ordered discovery, the case has been filled with allegations. Some have been dismissed, others linger.

The FBI probe is looking at the electronic communication between Apotex and pharmacies, including Crosby, that has been pored over by antitrust lawyers. The FBI has been working with prosecutors in the District of Columbia, the Northern District of Texas and Colorado. Prosecutors have also retained a former federal judge who has previously led an antitrust investigation into the pharmaceutical industry to help as part of its probe.

Assistant U.S. Attorney Spencer Kornfeld said at Friday’s hearing that the investigation began after a “blunt type of communication” between Kerrest and sales representatives at pharmacies. Kornfeld said that it turned out that Apotex had placed ads in the trades, including in The Wall Street Journal, telling those pharmacies to no longer sell Apotex’s products and that Apotex had stopped returning some of the pharmacy’s cash.

As part of the investigation, Apotex has been asked to cooperate in finding out how other drug companies, which are known by the generic names of Hospira and Perrigo, are not recovering their profits.

The company has cooperated with the probe, but Apotex has said that it has a right to dispute any factual information gathered in the probe.

Kerrest will have a chance on Tuesday to explain more about the company’s affairs.

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