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Aceto wins court case on sale of drugs with foreign-made ingredients

Aceto Corp. has won a court decision that

Aceto Corp. has won a court decision that will allow it to continue supplying generic drugs to the VA. Credit: Barry Sloan

Port Washington drugmaker Aceto Corp. has won a favorable ruling in a federal court case about whether it can supply drugs to U.S. veterans that contain some active ingredients from other countries.

United States Court of Federal Claims Judge Margaret M. Sweeney ruled in Washington that under the Buy American Act, the U.S. Department of Veterans Affairs is allowed to buy drugs that are made in the United States, even if some of their components are manufactured abroad. The ruling was published Monday after being filed under seal on July 10.

The company’s stock  closed up 4 percent to $3.41 on Tuesday. Adjusted for splits and dividends, the stock closed a year ago at $15.51. 

The ruling could allow Aceto to win back some of the 11 VA contracts it lost earlier this year, after the federal government ordered it to begin providing generic drugs without Indian ingredients by March 26 or face termination of the supply contracts.

The government has 60 days to appeal the new ruling, William C. Kennally III, the company's chief executive, said in an interview Tuesday. If the government does not appeal or if the decision holds on appeal, Aceto will be able to rebid on most of those contracts, though some contracts might already have been awarded to others, Kennally said.

The VA contracts made up about 15 percent of Aceto's revenues, he said. "We probably won't get the entire 15 percent back, we’ll probably get a portion of it back," he said. "Any additional revenue and profit is welcome . . . I’m glad we have an opportunity to go back to serving veterans and the VA system."

Kennally has said that the order to find domestic sources of the ingredients is "neither realistic nor attainable given the regulatory process required" by the federal Food and Drug Administration, and that the generic drugs are affordable to veterans because some ingredients are made in India, where costs are lower. 

Aceto bought the rights to the 11 drugs in 2016 from Lucid Pharma LLC in New Jersey as part of a $462 million deal with Lucid affiliate Citron Pharma LLC in East Brunswick, New Jersey. The deal allowed Aceto to continue to sell the medications to the VA under contracts that had been in effect for several years, Kennally said.

In April Aceto announced it had hired the investment bank PJT Partners and the law firm Lowenstein Sandler LLP, both in Manhattan, to explore a potential "sale of key business segments, a merger or other business combination with another party, continuing as a stand-alone entity or other potential alternatives," the company said.

That strategic review is ongoing, Kennally said Tuesday.


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