Two former N.J. pharmaceutical executives are accused by the Justice Department of conspiring with other drugmakers to fix prices of generic medicines, representing the first criminal charges in an ongoing federal antitrust investigation into anticompetitive conduct in the generic-drug industry.
Jeffrey A. Glazer, former CEO and chairman of Heritage Pharmaceuticals in Eatontown, Monmouth County, and Jason T. Malek, senior vice president of commercial operations and later president, were charged with felony counts filed in U.S. District Court for the Eastern District in Philadelphia and unsealed Wednesday.
Glazer and Malek are accused by the government of colluding with unnamed corporations and individuals not to compete for customers, and to submit bids, and withhold bids, and execute noncompetitive price strategies.
According to the criminal charges, Glazer and Malek -- who are described as brothers-in-law -- conspired to fix prices and rig bids of generics drugs, such as the antibiotic doxycycline hyclate to treat bacterial infections, including some that cause acne, and glyburide for diabetes, from April 2013 until at least December 2015.
Heritage Pharmaceuticals said the fraud had gone on for at least seven years. It said Wednesday that Glazer and Malek were fired in August after an internal investigation "revealed a variety of serious misconduct."
Heritage last month filed a civil lawsuit in New Jersey federal court accusing Glazer and Malek of "an elaborate embezzlement and self-dealing scheme." The company said it was fully cooperating with the government's continuing investigation.
In a 133-page civil lawsuit, Glazer and Malek were accused by their employer of looting "tens of millions of dollars" by "misappropriating" the company's business opportunities, fraudulently obtaining compensation for themselves, and embezzling intellectual property.
The company alleged that Glazer and Malek created at least five dummy corporations, which they used to siphon off Heritage's profits "through numerous racketeering schemes."
In one scheme, the lawsuit said, the defendants and other coconspirators "deeply discounted sales of Heritage products to their dummy corporations, or through complicit third parties willing to act as straw buyers in return for bribes."
"Glazer and Malek then illicitly pocketed the profit that resulted when the transaction's true end purchaser -- one of Heritage's own customers -- paid the market price for Heritage's products," the suit said.
The pair used private email servers, fake offices, and false online identities to hide the scheme, the company charged.
"The magnitude of the defendants' theft is captured in one August 2015 text message exchange, in which Glazer told Malek that their scheme had netted $466,000 in profit that day."
Generic drugs are chemically equivalent copies of brand-name medicines and usually less expensive than the original branded drugs.
Bloomberg News reported that other generic drugmakers have received subpoenas, including Teva Pharmaceutical Industries, Mylan, Actavis, Lannett Co., Impax Laboratories, Covis Pharma Holdings, Sun Pharmaceutical Industries, Endo International's unit Par Pharmaceutical Holdings, and Taro Pharmaceutical Industries. None of the companies is named in the government's case against Glazer and Malek.