US states sue Teva for price-fixing in ‘multi-billion dollar fraud’

US states sue Teva for price-fixing in ‘multi-billion dollar fraud’

Israeli drug manufacturer named as ‘consistent participant’ in conspiracy to raise prices, sometimes by more than 1000%; company denies wrongdoing, vows to defend itself

The Horsham, Pennsylvania, offices of Teva Pharmaceuticals (AP Photo/George Widman)
The Horsham, Pennsylvania, offices of Teva Pharmaceuticals (AP Photo/George Widman)

Teva was named Friday in an anti-trust lawsuit brought by over 40 US states alleging a price-fixing conspiracy among drug manufacturers, with the Israeli company said to have raised the costs of some medications by over 1000 percent.

“Teva is a consistent participant in the conspiracies identified in this complaint, but the conduct is pervasive and industry-wide,” stated the complaint, according to Bloomberg.

The lawsuit “puts Teva at the center of the conspiracy,” to collude with drug makers to artificially raise prices, Bloomberg reported.

The company, generally ranked as Israel’s biggest or second biggest firm, denied any wrongdoing and vowed to defend itself.

According to the Washington Post, the lawsuit claims executives at the drug companies deleted text messages and worked together to obstruct the investigation.

During a 19-month period from 2013 to 2015, Teva is said to have significantly raised prices on around 112 generic drugs and colluded on at least 86 other drugs, the states said in the suit, according to the report. Some of the increases were more than 1000%.

Illustrative photo of pills in the Teva Medical Factory in Har Hotzvim, Jerusalem, March 15, 2010. (Nati Shohat/Flash90)

“Through its senior-most executives and account managers, Teva participated in a wide-ranging series of restraints with more than a dozen generic drug manufacturers, all of whom knowingly and willingly participated,” the suit stated.

Executives named in the complaint include Maureen Cavanaugh, a former senior vice president for Teva, and David Rekenthaler, a former vice president of sales at the company.

The suit is being brought by more than 40 states led by Connecticut Attorney General William Tong.

“That the biggest generic drug manufacturer in the world is one of the leaders of this marketwide collusion is beyond disappointing, and in some ways dispiriting,” Tong told the Washington Post, referring to Teva.

“We have hard evidence that shows the generic drug industry perpetrated a multi-billion dollar fraud on the American people,” Tong said in a statement. “We all wonder why our health care, and specifically the prices for generic prescription drugs, are so expensive in this country — this is a big reason why.”

William Tong in East Hartford, Connecticut, May 1, 2012 (AP Photo/Jessica Hill)

The suit does not specify the amount of damages or any penalties being sought.

A spokeswoman for the company in Israel dismissed the lawsuit as nothing more than “claims.”

“Teva will continue to examine the issue internally and there is nothing in its conduct that could lead to civilian or criminal accountability,” she said in a statement sent to AFP.

“Teva supplies high quality medication to patients around the world while retaining its commitment to all laws and rules,” she said. “We will continue to resolutely defend the company.”

In December, the company was named by the Washington Post as one of at least 16 generic drug manufacturers facing investigation into alleged price-fixing in the United States.

“This is most likely the largest cartel in the history of the United States,” Joseph Nielsen, an assistant attorney general and antitrust investigator involved in the probe, told the US newspaper.

The Teva medical laboratory in Har Hotzvim, Jerusalem, March 15, 2010. (Nati Shohat/Flash90)

Executives from the drug companies, which included Mylan and Dr. Reddy’s along with Teva, were said to have developed a lingo to communicate between themselves about how they would divide the market, dubbed “the sandbox,” in what amounted to an “illegal price-fixing schemes of massive proportion,” according to the newspaper.

“Trashing the market” was used when a company marketed drugs for lower prices than those agreed upon, and “fair share” was to ensure that all competitors made comfortable profits.

The report revealed that executives from rival companies were on such good terms with each other that they had an alphabetical rotation for who paid for each of their regular dinners, according to a source familiar with the probe who spoke anonymously.

The generic drug market was specifically created to save patient and taxpayer money through aggressive market competition.

Generic drugs were said to account for 90% of prescriptions in the US, but only 23% of the costs, according to the Association for Accessible Medicines, and have been said to lower medication costs. However, any raised prices for medication that came about due to price-fixing would be borne by patients.

The anti-competitive agreements were said to have driven up prices on most if not all medications sold by the companies, according to the investigation.

Investigators said last year they have a huge amount of documentation, much of it unavailable to the public, and they expect further defendants to be added to the lawsuit in the future. It is believed this could pressure the drug companies to consider settling the case.

Kåre Schultz, CEO and president of Teva. (Courtesy)

Last year, a federal judge ruled that over 1 million emails, cellphone texts and other documents could be shared with plaintiffs.

Teva said in a court filing last year that accusations of a price-fixing conspiracy “are entirely conclusory and devoid of any facts.”

Teva, the world’s number one generic drugmaker, has been hit hard by price pressure and competition in its core generic business, the loss of patent protection on its blockbuster multiple sclerosis drug Copaxone, and a more than $30 billion debt load stemming from its acquisition of the generics business of Allergan. It is in the midst of a restructuring program under CEO Kåre Schultz, who in early 2018 laid out a two-year turnaround timeline and predicted a “clear move upward” in 2020.

Last year, the Israeli Justice Ministry fined Teva $22 million for bribing foreign officials to win business in Russia, Ukraine and Mexico, rather than pressing charges in court against the drugmaker.

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