AmerisourceBergen says civil penalty to resolve DOJ probe now at $625M

It turns out that the quarter-crushing $575 million that drug wholesaler AmerisourceBergen set aside to settle civil litigation with the Justice Department was not enough. It is going to take another $50 million.

That comes on top of the $260 million the drug distributor has already paid to resolve a criminal misdemeanor charge tied to its sales of injected cancer meds produced in a plant that was not FDA certified. With Tuesday’s disclosure, the company has now agreed to pay $885 million to resolve both civil and criminal allegations which are tied to issues that reach back more than 15 years.

The company Tuesday in a filing reported it increased its Q4 set aside to $625 million to cover the agreement, which is awaiting court approval. That comes after it reported earlier this month, that the $575 million the company originally accrued in Q4 resulted in a loss of $1.35 per share for the quarter.

The Valley Forge, Pennsylvania-based drug distributor today declined to comment but in its filing said it "recently reached an agreement in principle" with the U.S. Attorney's Office for the Eastern District of New York, "which the company understands will resolve the alleged civil claims in their entirety."

The civil case stemmed from alleged violations of the federal False Claims Act. The DOJ has alleged that between 2001 and 2014 two of the wholesaler’s Alabama-based subsidiaries—Oncology Supply Co. and the now-defunct Medical Initiatives—prepared millions of syringes of cancer medicines, including Aloxi and Anzemet and generics of  Neupogen and Procrit, in an unapproved facility.

When it pleaded to the criminal misdemeanor the company said that while the former Medical Initiatives facility was not registered with the FDA, it had passed inspections by the Alabama Board of Pharmacy. It pointed out that the complaint did not indicate any patients were harmed by the drugs and that FDA testing of syringes that were seized in the case had not found any "quality concerns."

While the case has been hard on AmerisourceBergen’s 2017 financials, the company is expecting the picture to improve this fiscal year after announcing Tuesday that it will pay $815 million in cash for H. D. Smith, the largest independent drug distributor left in the U.S. It said the acquisition, which it expects to close in early 2018, could add slightly to the current fiscal year, and is now projecting revenue growth to be in the range of 8% to 11%, compared with its an earlier forecast of 7% to 8%.