AmerisourceBergen hands over another $625M for manufacturing violations
- AmerisourceBergen Corp. has agreed to pay $625 million to settle a civil case that claimed a pre-filled syringe program at one of its subsidiaries violated federal law.
- The subsidiary, Medical Initiatives Inc. (MII), shut down in 2014, but before then was responsible for transferring cancer medications from glass vials to syringes. MII wasn't registered with the Food and Drug Administration, however, spurring the U.S. Attorney's Office for the Eastern District of New York (USAO-EDNY) to pursue a civil case against AmerisourceBergen under the False Claims Act.
- In September, AmerisourceBergen handed over $260 million to settle criminal chargers related to MII. The big drug distributor plead guilty to a one-count strict-liability misdemeanor violation of the Federal Food, Drug and Cosmetic Act, and agreed to enter a three-year compliance agreement with the U.S. Department of Justice.
This newest settlement puts to bed a long legal saga for AmerisourceBergen. Since the company's 2012 fiscal year, the USAO-EDNY has requested information about MII's pre-filled syringe program — as well as other, related pieces of AmerisourceBergen's business, such as its oncology distribution center.
Though the payout is steep, AmerisourceBergen has prepared for it. The company revealed in its latest annual report that, after reaching an agreement with federal officials, it built a reserve of $625 million to deal with the civil claims. During the whole of 2017, AmerisourceBergen racked up $914 million in litigation settlements and accruals.
Still, that's just a drop in the bucket for a company that made $153 billion in revenue last year. To that end, investors appeared undeterred by the civil claims disclosed; AmerisourceBergen stock opened at $79.98 per share on Wednesday, up less than 1% from the prior day's close. Shares continued to rise throughout the morning, though, reaching almost $82 apiece at one point.
The civil outcome is also noteworthy given that Amerisource said it would "vigorously defend itself" against such claims. In that light, the company may have viewed the $625 million as an advantageous solution.
Aside from the money, the lasting impact of the USAO-EDNY's investigation will be the three-year compliance agreement AmerisourceBergen entered as part of the guilty plea.
- SEC Form 8-K
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