First Charges Filed in Generic Drug Price Probe: Connected Stocks Sell Off

According to a Bloomberg report, Jeffrey Glazer, the ex-CEO Heritage Pharmaceuticals, and Jason Malek, an ex-president of the company, were accused of conspiring with executives at other drug makers to fix the prices of antibiotic and a drug that is used for the treatment of diabetes.

Text messages between the two executives from April 2015 suggest they each pocketed $466,000 in profit from their illegal actions in one day alone.

The Bloomberg report shouldn't come as a complete surprise to the investment community. Prior reports in early November suggested that charges against executives of generic companies would be filed in December amid a two-year antitrust investigation.

"Millions of Americans rely on prescription medications to treat acute and chronic health conditions," Deputy Assistant Attorney General Brent Snyder of the Justice Department's antitrust division told Bloomberg in a statement on Wednesday. The charges are an important step "in ensuring that generic pharmaceutical companies compete vigorously to provide these essential products at a price set by the market, not by collusion."

Stock Reactions

Bloomberg stated that Mylan NV MYL and Teva Pharmaceutical Industries Ltd (ADR) TEVA are among several drug makers that have received subpoenas. Stocks of both companies were trading lower by more than 2 percent Wednesday afternoon.

Other companies mentioned in the Bloomberg report and their respective performance on Wednesday include: