The U.S. Department of Justice has indicted Israeli generic drug manufacturer Teva Pharmaceutical Industries Ltd. in Pennsylvania federal court for fixing drug prices. Teva is alleged to have overcharged consumers, raking in an additional $350 million.
The company had nearly $17 billion in sales last year. It has been crippled recently by debt and the collapse of generic drug prices.
Teva is accused of three different conspiracies occurring from May 2013 to December 2015 to fix prices, rig bids, and allocate customers for generic drugs. One conspiracy involves cholesterol treatment pravastatin (Pravachol). The other two involve drugs meant to treat arthritis, blood clots, cancer, cystic fibrosis, hypertension, pain, seizures and skin conditions.
These types of cases usually are settled out of court. The costs of losing a trial are high, and in cases of conspiracy, like this one, the other companies typically cooperate with the government, upping the potential pain for any alleged conspirator that refuses to “play ball.”
If convicted, Teva faces possible exclusion from federal health-care programs. And each criminal charge carries a maximum penalty of $100 million… sort of. That fine can be doubled to twice the gain the company received as a result of its crimes or twice the loss suffered by any victims.
In a statement, Teva claimed innocence and said it is “deeply disappointed” that it is being prosecuted. Teva reviewed itself internally and found no price fixing.
In talks with prosecutors, Teva has been resistant to a settlement, which would likely include criminal penalties of hundreds of millions of dollars, a public admission of guilt and a deferred prosecution agreement. Teva’s reasons for balking against prosecution appear to be centered around losing all that money.
Notice that it has taken nearly five years to get an indictment on these issues, probably due to extended negotiations between the drug company and prosecutors.
States and private plaintiffs also have sued Teva and other makers of generic drugs for price fixing.
Teva is not alone in having federal charges; U.S. federal investigators have been pursuing other drug makers as well. Some have made deals with the investigators, including Sandoz, a subsidiary of Novartis AG, which has agreed to pay $195 million in criminal penalties, Taro Pharmaceuticals Inc., which has agreed to pay $205.7 million in penalties and Apotex, which has agreed to pay $24.1 million in penalties. Glenmark Pharmaceuticals is also facing charges. Prosecutors allege that Teva has conspired with all of these companies to fix prices.
In the cases that have been settled, the prosecutors have agreed to defer criminal charges and eventually drop them if the company agrees to pay the penalties, say they were wrong and cooperate. In the Teva case, the Feds win either way. If Teva settles, they get hundreds of millions of dollars. If Teva loses, they get hundreds of millions of dollars.
Why is this happening? Branded drugs are often costly, as research and development costs are included in the “asking price.” Once a branded drug is past its period of exclusivity, regulators can allow companies to create and market generic versions of that drug. In theory, this creates competition and could reduce the price of the drug. But if all the companies who make the generic drugs conspire to keep prices high, patients don’t end up getting a great price, even after the expensive branded drug isn’t the only game in town.
About 90% of the drugs legally used in the United States are generics.
The U.S. Justice Department has also started a civil lawsuit against Teva, claiming that the company is trying to defraud Medicare and price gouge on multiple sclerosis drug Copaxone. Teva and other drug manufacturers are facing additional lawsuits at many levels based on accusations that they contributed to the U.S. opioid crisis.
Disclaimer: This article does not provide medical advice. Do not take action based solely on this article and always consult with an appropriate healthcare professional. This article is purely for informational purposes.