DOJ Antitrust Division Announces Deferred Prosecution Agreements with Two Pharmaceutical Companies Containing “Extraordinary” Divestiture Remedy

On August 21, 2023, the Justice Department's Antitrust Division announced that it entered into two deferred prosecution agreements with Teva Pharmaceuticals USA, Inc. and Glenmark Pharmaceuticals Inc., USA. The agreements resolve antitrust charges against the companies and bring to a close a series of criminal prosecutions that the Antitrust Division pursued against seven generic pharmaceutical companies accused of conspiring to fix prices, rig bids, and allocate markets for generic medications sold in the United States.¹ Including Teva's $225 million penalty and Glenmark's $30 million penalty, the seven defendant generic manufacturers have agreed to pay more than $681 million in fines to resolve the criminal antitrust conspiracy charges.² Also notable is that this appears to be the first instance where the Antitrust Division has utilized deferred prosecution agreements to resolve criminal charges after filing a complaint and litigating. Previously, the Division had utilized such agreements only concurrent with the charging. But, according to the Antitrust Division, the extraordinary aspect of these agreements is that they require the defendants to divest pharmaceutical products that were the subject of the unlawful conduct.³

As a preliminary matter, these new agreements with the Antitrust Division are significant simply in that they are not plea agreements. In lieu of pleading guilty, the companies were able to enter into deferred prosecution agreements ("DPA"), a resolution that the Antitrust Division began utilizing independently only as recently as 2019,⁴ having previously used them solely in cases involving other government offices, and often involving financial entities, such as in the LIBOR benchmarking litigations.⁵ Compared to plea agreements, DPAs may be preferable for defendants, including because they allow companies to avoid debarment from federal contracts, which is a consequence of a guilty plea.⁶ As such, a DPA permits pharmaceutical (and other) companies to resolve criminal charges short of a guilty plea or trial while avoiding mandatory exclusion from participation in federal healthcare programs, such as Medicare and Medicaid, which can amount to a substantial share of annual sales for a company.⁷

Although the other generic manufacturer defendants accused of conspiring with Teva and Glenmark entered into deferred prosecution agreements in 2020, here the circumstances are different and worthy of note. First, the Teva and Glenmark DPAs appear to be the first DPAs the Antitrust Division has entered under the Biden Administration. Second, with other generic companies the DPAs were entered concurrent with the companies being charged.⁸ In contrast, while Glenmark and Teva were charged in June and August of 2020, respectively, they litigated the charges for three years, and only then resolved the charges through last month's deferred prosecution agreements.⁹ In fact, these appear to be the first DPAs the Antitrust Division has agreed to after the charges have been filed and litigation has proceeded. Third, also notable is that while, as is normal, the August 2023 DPAs contain certain factual admissions, they are far narrower than the allegations in the June 2020 information filed against Glenmark and the August 2020 indictment adding Teva as a defendant.^10,11

But those differences are not what makes these agreements "extraordinary" in the Antitrust Division's view. These recent DPAs also contain two key features that may signal a push by the Antitrust Division to seek more significant and even unprecedented remedial measures when resolving criminal antitrust investigations short of a guilty plea or trial:

• Divestiture: First, as part of their DPAs, both companies agreed to divest their rights, title, and interest in their respective generic pravastatin products and forego sale of the products in the United States for a period of five years. According to DOJ, pravastatin, a medication prescribed to treat cholesterol and which is known to lower the risk of heart disease and stroke, was the product at the "core" of the allegedly unlawful agreements and "central to the misconduct."¹² The DPAs require each company to work quickly toward the divestiture of their respective pravastatin products. Teva agreed to find a purchaser with the intent and capability to effectively compete in the sale of pravastatin within three months of executing the deferred prosecution agreement and to enter an agreement with the selected purchaser within six months following DOJ's approval of its choice.¹³ Glenmark similarly agreed to rescind the rights of Glenmark Pharmaceuticals Ltd. to distribute generic pravastatin in the United States within seven months of the deferred prosecution agreement's effective date.¹⁴
• Donation: Second, according to DOJ, the anticompetitive conduct impacted the prices of two additional products—clotrimazole (used to treat skin infections) and tobramycin (used to treat eye infections and cystic fibrosis). In addition to the payment of a $225 million penalty and the divestiture of pravastatin, Teva also agreed to donate a $50 million supply of clotrimazole and tobramycin to humanitarian organizations that provide medication to Americans in need.¹⁵

The two companies also agreed to certain other terms, that while significant, are more typically part of DOJ's pharmaceutical antitrust settlements. 

• Broad Cooperation Obligations: For instance, both agreed to cooperate with DOJ's "current federal criminal investigation into violations of federal antitrust and related criminal laws involving the production and sale" of generic pharmaceutical products in the United States, by (1) producing all non-privileged documents, information, and other materials requested by the United States (2) securing the full, truthful, and continuing cooperation and testimony of current and former officers, directors, employees, and agents of the companies, and (3) allowing the disclosure of cooperation materials to other governmental authorities in and outside of the United States. 
• Ongoing Duty to Report: Both companies also agreed to promptly report to DOJ credible evidence of any conduct that might constitute a federal criminal antitrust violation while the deferred prosecution agreements are in effect.¹⁶

The DOJ describes these agreements as containing "extraordinary remedial measures that require the breakup of assets and restore competition to the industry."¹⁷ And indeed, certain of the remedies are unique; no other generic conspirator charged by the DOJ as part of its investigation of the generic pharmaceutical industry agreed to divestiture or to the donation of drug products.¹⁸ Nor have these resolutions been used previously in Antitrust Division DPAs, and certainly not years after charging and ensuing litigation. 

In sum, the Antitrust Division's use of DPAs here, including after charging and litigating for years, may signal continued openness to resolving criminal charges short of a guilty plea or trial. But companies entering settlement negotiations with the DOJ should be aware and prepared that they may be asked for unique remedial measures that don't merely require payment of fines and cooperation, but that may also impact ongoing business operations in other ways.

_{1 See DOJ Press Release, Major Generic Drug Companies to Pay Over Quarter of a Billion Dollars to Resolve Price-Fixing Charges and Divest Key Drug at the Center of Their Conspiracy (Aug. 21, 2023) (hereinafter "DOJ August 21 Press Release"). 
2 Id. 
3 Id.
4 See, e.g., DOJ Speech, Assistant Attorney General Makan Delrahim Delivers Remarks at the New York University School of Law Program on Corporate Compliance and Enforcement (July 11, 2019). 
5 See, e.g., DOJ Press Release, LIBOR Deferred Prosecution Agreement (Oct. 29, 2013) (including $325 million penalty).
6 The United States Department of Justice, Justice Manual at 9-28.1100 ("Prosecutors should also be aware of non-penal sanctions that may accompany a criminal charge, such as potential suspension or debarment from eligibility for government contracts or federally funded programs such as health care programs.")
7 42 U.S.C. § 1320a-7.
8 See, e.g., DOJ Press Release, Major Generic Pharmaceutical Company Admits to Antitrust Crimes (March 2, 2020); DOJ Press Release, Generic Pharmaceutical Company Admits to Fixing Price of Widely Used Cholesterol Medication (May 7, 2020); DOJ Press Release, Sixth Pharmaceutical Company Charged In Ongoing Criminal Antitrust Investigation (July 23, 2020). 
9 DOJ August 21 Press Release.
10 Compare Second Superseding Indictment at 7, 11, 15–16, United States of America v. Teva Pharmaceuticals USA, Inc., 20-cr-200 (Aug. 25, 2020), ECF No. 28 with Deferred Prosecution Agreement at Attachment A C–E, United States of America v. Teva Pharmaceuticals USA, Inc., 20-cr-200 (Aug. 21, 2023), ECF No. 186 (hereinafter "Teva Deferred Prosecution Agreement") (admitting only to refraining from submitting certain specific bids and offers to certain customers). 
11 Compare Information at 5–6, United States of America v. Glenmark Pharmaceuticals Inc., USA, 20-cr-200 (June 30, 2020), ECF No. 188 with Deferred Prosecution Agreement at Attachment A, United States of America v. Glenmark Pharmaceuticals Inc., USA, 20-cr-200 (Aug. 21, 2023), ECF No. 188 (hereinafter "Glenmark Deferred Prosecution Agreement") (admitting only to the conspiracy to suppress competition by agreeing to increase and maintain a higher price of one product)
12 DOJ August 21 Press Release.
13 See Teva Deferred Prosecution Agreement at Attachment E § III. 
14 See Glenmark Deferred Prosecution Agreement at Attachment E. 
15 Teva Deferred Prosecution Agreement 8, 14.
16 Teva Deferred Prosecution Agreement 6–7; Glenmark Deferred Prosecution Agreement 6–7.
17 DOJ August 21 Press Release.
18 See, e.g., DOJ Press Release, Major Generic Pharmaceutical Company Admits to Antitrust Crimes (March 2, 2020); DOJ Press Release, Generic Pharmaceutical Company Admits to Fixing Price of Widely Used Cholesterol Medication (May 7, 2020); DOJ Press Release, Sixth Pharmaceutical Company Charged In Ongoing Criminal Antitrust Investigation (July 23, 2020).}

Zarka Shabir (Law Clerk, White & Case, New York) contributed to the development of this publication.

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