8-KRegulation FD

Cencora, Inc. 8-K Report, Regulation FD Disclosure (Nov 21, 2017)

Filed November 21, 2017For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) filed an 8-K on November 21, 2017, disclosing significant developments regarding legal proceedings with the U.S. Attorney's Office for the Eastern District of New York (USAO-EDNY). The company and its subsidiary, AmerisourceBergen Specialty Group (ABSG), have been cooperating with an investigation since fiscal 2012 concerning the pre-filled syringe program of ABSG's subsidiary Medical Initiatives, Inc., its oncology distribution center, and related product transfers. This filing primarily addresses the resolution of a criminal investigation and an agreement in principle for civil claims.

Key Highlights

  • 1ABSG entered a guilty plea to a one-count misdemeanor violation of the Federal Food, Drug and Cosmetic Act, resolving a federal criminal investigation related to Medical Initiatives, Inc.'s failure to register with the FDA.
  • 2A criminal fine and forfeiture of $260.0 million was paid in fiscal 2017, recognized in the company's Consolidated Statements of Operations.
  • 3ABSG also entered into a three-year Compliance Agreement with the U.S. Department of Justice.
  • 4The USAO-EDNY indicated intent to pursue alleged civil claims under the False Claims Act.
  • 5ABSG has reached an agreement in principle to resolve these alleged civil claims in their entirety.
  • 6Under the agreement in principle, ABSG will pay $625.0 million to resolve the civil claims.
  • 7The company increased its reserve accrual to $625.0 million for the fiscal year ended September 30, 2017, reflecting advanced settlement discussions and the agreement in principle, which will be reflected in the upcoming Form 10-K.

Frequently Asked Questions

Cencora, through its subsidiary ABSG, is addressing resolutions with the U.S. Attorney's Office for the Eastern District of New York (USAO-EDNY) concerning a criminal investigation and alleged civil claims related to its subsidiary Medical Initiatives, Inc.'s operations, specifically its pre-filled syringe program and oncology product distribution.

ABSG pleaded guilty to a misdemeanor violation of the Federal Food, Drug and Cosmetic Act. This plea resolves the criminal investigation into Medical Initiatives, Inc.'s failure to register with the FDA. As part of this resolution, ABSG paid a $260.0 million criminal fine and forfeiture in fiscal 2017 and entered a three-year Compliance Agreement with the Department of Justice.

ABSG has reached an agreement in principle with the USAO-EDNY to resolve alleged civil claims under the False Claims Act. The company expects to pay $625.0 million to settle these claims. This agreement is subject to final negotiation, execution of definitive documents, and court approval.

The company has recognized the $260.0 million criminal fine in fiscal 2017. For the civil claims, the company had accrued a $575.0 million reserve based on prior discussions and has now increased this reserve accrual to $625.0 million to reflect the agreement in principle. This total reserve increase of $625.0 million for the fiscal year ended September 30, 2017, will be reflected in the company's Annual Report on Form 10-K.