Former Generic Pharmaceutical Executive Pleads Guilty for Role in Criminal Antitrust Conspiracy

A former senior executive pleaded guilty today for his role in a conspiracy to fix prices, rig bids, and allocate customers for generic drugs, the Department of Justice announced.  

According to court documents, from at least March 2013 until at least June 2015, Hector Armando Kellum, a former senior executive at a generic pharmaceutical company based in New Jersey, conspired to fix prices, rig bids, and allocate customers for generic drugs. The conspiracy affected products including, but not limited to, clobetasol and nystatin triamcinolone cream.  Kellum’s co-conspirators included a generic pharmaceutical company headquartered in New York and various individuals, including Ara Aprahamian, who was indicted in Philadelphia on Feb. 4, 2020.  Kellum has agreed to cooperate with the Antitrust Division’s ongoing investigation into criminal antitrust violations in the generic drug industry.

“With today’s guilty plea, the Antitrust Division continues its prosecution of high-ranking executives who conspired to cheat America’s most vulnerable elderly consumers by raising prices for vital drugs,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Competition in our healthcare system is a critical focus for the Antitrust Division, and rooting out collusion by executives is a key priority in keeping our markets free.” 

“Today’s guilty plea by the former pharmaceutical senior executive is yet another example of the dedication and determination exhibited by the legal and investigative teams,” said Special Agent in Charge Scott Pierce, U.S. Postal Service Office of Inspector General. “Along with our partners at the Department of Justice and the Federal Bureau of Investigation, the U.S. Postal Service Office of Inspector General will continue to aggressively investigate those individuals responsible for unlawful behavior within the generic drug industry.”

“Kellum’s plea shows he lost sight of the basic principle that medicine is intended to heal sick people, not line an individual’s pockets by colluding to rig bids and manipulate drug prices,” said Timothy R. Slater, Assistant Director in Charge of the FBI Washington Field Office. “The FBI and our partners will continue to fight for the American public to have access to a competitive marketplace for pharmaceuticals. We will not stand by while large corporations and business executives in power try to skirt the rules at the expense of unsuspecting citizens.”

Kellum is the fourth executive to be charged in this investigation, and the third to plead guilty. To date, two companies have also been charged.  The corporate charges were resolved by deferred prosecution agreement.

A violation of the charged offense carries a statutory maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

This case is the result of an ongoing federal antitrust investigation being conducted by the Antitrust Division with the assistance of the United States Postal Service Office of Inspector General, the FBI’s Washington Field Office, the FBI’s Philadelphia Field Office, and the U.S. Attorney’s Office for the Eastern District of Pennsylvania. Anyone with information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to the generic drug industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

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Author: February 14, 2020

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