Teva Settles Price-Fixing Lawsuit with US Department of Justice Agrees to $225 Million Fine

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by Ifi Reporter Category:Financial Aug 23, 2023

Teva Pharmaceuticals has reached a settlement with the US Department of Justice (DOJ) regarding a lawsuit filed against the company in 2020 over allegations of price-fixing. The resolution of this legal battle marks a turning point for Teva, which has grappled with legal challenges affecting its share price in recent years.

Under the terms of the settlement, Teva has agreed to a conditional waiver of legal proceedings, known as a Deferred Prosecution Agreement. This agreement hinges on Teva avoiding any further accusations of price coordination for the next three years. If Teva remains compliant, it will avoid the risk of being disqualified from participating in tenders for the sale of drugs to federal health insurance programs, namely Medicare and Medicaid.

As part of the settlement, Teva will pay a fine of $225 million in cash over a span of five years. The fine will be distributed as follows: the company will pay $22.5 million annually from 2024 to 2027, and a larger sum of $135 million in 2028. In addition to the financial penalty, Teva has committed to several other actions:

  1. Discontinuation of Marketing: Teva will halt the marketing of a generic cholesterol-lowering drug, Pravastatin.

  2. Divestment of Drug: Teva will sell the rights to Pravastatin to another pharmaceutical company.

  3. Humanitarian Contribution: Teva will donate two generic drugs, valued at approximately $50 million based on wholesale prices, to humanitarian organizations.

The settlement does not absolve Teva from civil lawsuits that stem from the 2020 lawsuit. However, Teva expressed confidence in its ability to defend itself against these legal actions.

One notable aspect of the settlement is Teva's admission, contrary to its previous denials, that an employee of the company was involved in three instances of anti-competitive behavior between 2013 and 2015. These actions included agreements with Teva's competitors that prevented the company from participating in tenders for the supply of generic drugs. These agreements adversely affected the pricing of several treatment drugs, including Pravastatin for cholesterol, clotrimazole for skin fungus treatment, and tobramycin for eye inflammation and cystic fibrosis treatment. The implicated employee had left the company in 2016.

The DOJ's lawsuit, filed in August 2020, targeted seven pharmaceutical companies and four senior executives. Allegations revolved around coordinated price-fixing in drugs used for conditions such as cholesterol, epileptic seizures, pain, skin diseases, blood clots, brain cancer, cystic fibrosis, and hypertension. The lawsuit claimed that this collusion led customers to overpay by a combined $350 million. Among the companies involved were Apotex from Canada, Sandoz (a subsidiary of Novartis), Glenmark, and the Indian-Israeli Thero. The total settlements amounted to $680 million, with Teva being the highest-paying among the generic companies implicated in the price coordination scheme.

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