The Department of Justice (DOJ) announced that Teva Pharmaceuticals’ TEVA United States unit has been charged for conspiring to fix prices, rig bids and allocate customers for generic drugs in the United States. The indictment was filed in the U.S. District Court for the Eastern District of Pennsylvania and stated that Teva was involved in three conspiracies with other drugmakers from May 2013 to December 2015. The DOJ said that these conspiracies have led to substantially higher prices for generic drugs, costing American consumers at least $350 million of overpayments for these drugs.
The DOJ Antitrust Division has long been investigating generic companies indulged in a widespread illegal conspiracy to reduce competition and artificially hike and manipulate prices of generic prescription drugs. Most of the companies charged with such conspiracies have entered into settlements with DOJ and paid criminal penalties including Sandoz, the generic arm of Novartis NVS and Taro Pharmaceuticals. Teva, reportedly rejected a settlement offer, which required it to pay criminal penalties and also admit to its role in the conspiracies.
Teva responded to the charges by saying that it has fully cooperated with DOJ and tried to reach a resolution to the matter. It believes that it has not participated in any price fixing. If convicted, Teva will have to pay criminal charges and could have a material adverse impact on the its business.
Teva’s shares were down almost 4% in after-hours trading on Tuesday. Teva’s share price has declined 2.7% this year so far compared with the industry’s decrease of 9.7%.
Teva has been in news this month for all the wrong reasons. Earlier this month, The New York State Department of Financial Services (DFS) filed administrative charges against Teva and Allergan, a subsidiary of AbbVie ABBV, charging them with insurance fraud in connection with the opioid crisis.
The DFS charges claim that these companies used fraudulent marketing and promotional campaigns to promote their opioid products and legitimize their safety/efficacy to treat pain, which aggravated the country’s opioid crisis.
Opioid manufacturers and distributors like Teva, Allergan, Mallinckrodt, Johnson & Johnson JNJ and Amneal Pharmaceuticals have been blamed regularly for aggravating the country’s opioid epidemic by making and selling addictive prescription painkillers. Opioid drugs like morphine, codeine, oxycodone and fentanyl, which these companies market and are used as painkillers, have high abuse potential.
This month, the U.S. Justice Department filed a complaint against Teva, which stated that Teva used independent charitable foundations to illegally pay millions of dollars in kickbacks to cover Medicare co-payment obligations for its multiple sclerosis drug, Copaxone. The illicit payments were made to cover up for price increases of the drug and boost profits, which is in violation of the Anti-Kickback Statute.
Teva currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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