Israeli drug maker accused of sparking opiod crisis, conspiracies against U.S. citizens

By Brent Kendall and Jared S. Hopkins
Wall Street Journal
August 26, 2020 Anno Domini

WASHINGTON—The U.S. business of Teva Pharmaceutical Industries Ltd. was in- dicted Tuesday on charges the generic drugmaker fixed prices on cholesterol medication and other drugs.

The Justice Department’s antitrust division brought the case in a Pennsylvania federal court, alleging Teva Pharma- ceuticals USA engaged in anti- competitive conduct that re- sulted in at least $350 million in overcharges to consumers.

Prosecutors accused the company of fixing prices, rig- ging bids and allocating cus- tomers in three different con- spiracies, including for pravastatin, a commonly pre- scribed cholesterol drug whose brand name is Pravachol.

A second conspiracy in- volved price fixing on medica- tions used to treat arthritis, sei- zures, pain, skin conditions, and blood clots, the Justice Depart- ment alleged. The third alleged conspiracy involved drugs used to treat brain cancer, cystic fi- brosis, arthritis, and hypertension, the department said.

Teva participated in the conspiracies from May 2013 until at least December 2015,prosecutors alleged.

“Today’s charge reaffirmsthat no company is too big to be prosecuted for its role in conspiracies that led to sub- stantially higher prices for ge- neric drugs relied on by mil- lions of Americans,” said Assistant Attorney General Ma- kan Delrahim, the Justice De- partment’s top antitrust official.

Teva rejected the allegations and promised to defend itself in court, saying in a statement that it was “deeply disappointed that the government has chosen to proceed with this prosecution.” The company said its own internal investigation found no price-fixing.

The indictment is the highest-profile action in a long-running investigation that has swept across the generic-drug industry and has resulted in cases against seven companies and four executives so far.

Generic drugs account for some 90% of medications dispensed in the U.S.

Most companies so far have agreed to settle charges by paying criminal penalties, admitting wrongdoing and agreeing to cooperate, in exchange for deferred prosecution agreements in which the government would drop the cases eventually, as long as the defendant companies fulfilled their obligations under the settlements.

Among those that reached such deals were Novartis AG’s Sandoz subsidiary, which in March agreed to pay a $195 million criminal penalty, and Taro Pharmaceuticals Inc., which agreed last month to pay $205.7 million.

The Justice Department alleged Teva’s conspirators included Sandoz and Taro, as well as Apotex, which agreed to pay a $24.1 million penalty in May, and Glenmark Pharmaceuticals, which is facing charges the department announced in June. The company has pleaded not guilty.

Teva had met with top Justice Department brass to try to persuade them not to bring a case, and it was resistant to a settlement that would have included a deferred prosecution agreement, a sizable financial penalty and a requirement that the company admit wrongdoing, according to a person familiar with the matter.

Teva said it attempted to reach a resolution but the department “has shown an unwillingness to consider alternatives that would not deeply impact Teva and the stakeholders who depend on the company, including the patients who benefit from our medicines.”

Teva, which had nearly $17 billion in sales last year, is among the largest pharmaceutical companies by revenue globally. The Israel-based company has been challenged in recent years by the collapse of generic drug prices and a heavy debt load, seeing shares fall more than 80% since 2015. New management initiated a restructuring.

In addition to financial penalties, a felony conviction of Teva could lead to its exclusion from federal health-care programs.

The case would mark a rare showdown in court. Because the stakes of a criminal conviction can be so dire, companies in the Justice Department’s crosshairs for price fixing rarely elect to go to trial.

Each of the charges carries a statutory maximum penalty of $100 million, but the maximum fine may be increased to twice the gain derived from the alleged crime or twice the loss suffered by victims.

The charges are the latest headache for Teva, which also is facing price-fixing lawsuits from state attorneys general and private plaintiffs, including health insurers.

A coalition of states has filed three sweeping lawsuits related to alleged drug price-fixing since 2016 against a host of companies including Teva. The most recent, filed in June, involves alleged price-fixing of more than 80 prescription drugs including skin medications.

The states have alleged that conspiracies among top generics makers played out over years at routine industry events, including meals, parties and golf outings as well as through telephone calls, emails and text messages.

Teva has disputed the allegations.

The company’s U.S. unit also was hit with a separate civil lawsuit from the Justice Department this month alleging it engaged in a scheme to game the Medicare system and prop up high prices for its multiple sclerosis drug Copaxone. Teva denied the allegations.

Teva is also among drug manufacturers facing thousands of lawsuits brought by states, cities and counties accusing it of helping spark the nation’s opioid crisis. Last year, Teva agreed to a global settlement framework with several state attorneys general to resolve the claims, but so far nothing final has been announced.

Chief Executive Kare Schultz said in an interview this month he had hoped a deal would go through earlier this year, and that talks are continuing.