Drug Maker to Pay Fraud Fine

BOSTON — A Massachusetts maker of generic drugs agreed Wednesday to plead guilty to fraud and conspiracy charges and pay a fine of almost $10.7 million, the largest ever against a drug manufacturer, officials said.

Copley Pharmaceutical Inc. agreed to pay the fine to settle civil and criminal charges against the company in a plea agreement with the U.S. attorney for Massachusetts and the Food and Drug Administration.

It was “the largest criminal fine ever paid by a pharmaceutical company,” Assistant U.S. Atty. Mark Pearlstein told reporters.

“It’s fair to say that the investigation had an impact on the company’s corporate culture,” Pearlstein said.

Prosecutors were quick to add that they were still investigating executives and employees at the Canton-based company, which had sales of $130 million last year.

Under the settlement, the drug maker admitted that between May 1988 and July 1994 it altered the formulation or manufacturing processes for four FDA-approved drugs, including one over-the-counter nasal decongestant, and filed false reports about the products with the agency.

At about the time investigators began their probe, Copley stopped selling the decongestant, Brompheril Sustained Release Tablets, to pharmacies that sold the product under their own name, according to Gene Bauer, a Copley vice president and general counsel.

Pearlstein said the fact that no one was injured as a result of the illegal changes in formulations was “a fortuity.”

The other drugs, a hydrocortisone and pramoxin foam used to relieve rectal inflammation; potassium chloride tablets used by people taking a diuretic, including some with heart ailments; and procainamide tablets, used to treat irregular heartbeats, are prescription medications.

The fine represents a multiple of the ill-gotten gains the company reaped by changing the formulations, prosecutors said. It will be paid in three installments over the next two years and will result in Copley taking a charge of $2 million, or 10 cents a share, against earnings in the second quarter.

The investigation began after two brothers who worked for the company, Michael and Mark Riley, “blew the whistle on their superiors and company,” Pearlstein said.

The plea agreement is subject to approval by a judge.

Copley stock fell 44 cents to $6.19 on Nasdaq.