Cody Labs parent company faces claims in multi-state price-fixing investigation

The parent company of Cody Labs faces claims from state attorneys general in a price-fixing investigation. Cody Labs is for sale after halting construction on a planned new facility at the north end of Cody, Wyo.

The parent company of Cody Labs faces claims from state attorneys general in a price-fixing investigation. Cody Labs is for sale after halting construction on a planned new facility at the north end of Cody, Wyo.

 

CODY, WYO. — Investigations by attorneys general for several states into generic drug price fixing appear to be advancing, and the parent company of Cody Labs is likely to be subject to claims brought as a result of that investigation, according to a recent federal securities filing.

Philadelphia-based pharmaceutical manufacturer Lannett, Co. disclosed in a public quarterly report filed Monday that it was notified earlier this month by investigators that the company was among a group of drug manufacturers state attorneys general will be filing claims against in a long-running, multi-state investigation into anti-competitive behavior in the generic drug industry.

Cody Labs is a wholly owned subsidiary of Lannett, which also operates drug manufacturing facilities in Carmel, N.Y. and Seymour, Ind. Lannett announced in October a plan to sell its Cody plant, which makes active pharmaceutical ingredients.

“On May 1, 2019, the Company and one of its employees, along with other generic pharmaceutical manufacturers, received written notice from various state Attorneys General that they intend to bring claims alleging price fixing and anti-competitive behavior with respect to additional drug products, some of which are manufactured and distributed by the Company,” Lannett stated in its quarterly filing.

Lannett said “the Company does not know when such claims will be filed, what allegations will be made against the Company or any of its employees or other affiliated individuals, or whether allegations against the Company will be related to any of the additional drug products identified in the notice.”

The company also has been a part of an ongoing investigation by the U.S. Department of Justice into anti-competitive behavior by generic manufacturers.

The company has stated previously that it has complied with all state and federal laws, and repeated that assertion in its quarterly filing Monday. Lannett also said an extensive review by outside counsel has found no wrongdoing, and that it continues to cooperate with investigators.

Though Lannett reported generally positive news on its quarterly earnings Monday, investors responded negatively — driving the stock down sharply — in apparent reaction to the disclosure that the company would face claims and potentially steep fines as part of the multi-state investigation into price fixing.

Court documents unsealed in April offered some insight into how state investigators from Connecticut and several other states will seek to make their case alleging price fixing in generic drug markets. Text messages and other communications entered into evidence show employees from Lannett and other manufacturers communicating with each other in what investigators allege were discussions regarding the timing and other details of drug price increases.

In a February conference call with investors and financial reporters, Lannett CEO Tim Crew said he expected the company to complete its sale of Cody Labs by the end of June. No details have been released about prospective buyers.

Lannett sought public assistance in 2016 for a low-interest state loan for the construction of a separate new facility at an industrial park in north Cody. But the company never finalized a $23 million loan approved by the State Loan and Investment Board, and halted construction on the new facility midway through the project.

Cody Labs announced last summer a restructuring plan that was expected to result in approximately 50 employees being laid off as Lannett sought to pay down $1 billion in debt resulting from purchasing two competitors. 

Contact Ruffin Prevost at 307-213-9818 or [email protected].

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