Teva shares tumble as company faces price-fixing lawsuit

The Israeli pharmaceutical company is being sued in the US following an alleged price-fixing conspiracy worth "many billions of dollars."

A building belonging to generic drug producer Teva, Israel's largest company with a market value of about $57 billion, is seen in Jerusalem (photo credit: REUTERS/BAZ RATNER)
A building belonging to generic drug producer Teva, Israel's largest company with a market value of about $57 billion, is seen in Jerusalem
(photo credit: REUTERS/BAZ RATNER)
Teva Pharmaceutical Industries’ shares tumbled on Sunday after 44 US states filed a lawsuit against the drug-maker and 19 other generic pharmaceutical companies over allegations of an extensive drug price-fixing conspiracy worth “many billions of dollars.”
Company stocks on the Tel Aviv Stock Exchange plummeted by 10.7% during Sunday trading, dropping from a pre-weekend closing price of NIS 52.23 to NIS 46.66 per share.
The company is also listed on the New York Stock Exchange, where trading will resume on Monday.
According to the lawsuit filed Friday by Connecticut Attorney-General William Tong, Teva significantly raised prices on approximately 112 different generic drugs between July 2013 and January 2015, and colluded with “high quality” competitors on at least 86 of them. While the extent of the price increases varied, some prices hikes allegedly exceeded 1,000%.
Over the course of many years, the lawsuit said, “Competitors in the generic drug industry would systematically and routinely communicate with one another directly, divvy up customers to create an artificial equilibrium in the market and then maintain anti-competitively high prices.”
Generic drugs are pharmaceutically identical to brand name drugs, and are permitted for sale after the expiry of market exclusivity granted by patent rights to their original developer. The off-patented drugs, often significantly cheaper than brand name treatments, account for approximately 90% of all US prescriptions.
“Defendant Teva is a consistent participant in the conspiracies identified in this complaint, but the conduct is pervasive and industry-wide,” alleged the lawsuit.
“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. As a result of these conspiracies, Defendants reaped substantial monetary rewards.”
On Saturday, a senior Teva representative rejected the claims, and vowed that the company would fight the lawsuit.
“The allegations in this new complaint, and in the litigation more generally, are just that – allegations,” said Teva vice president Kelley Dougherty.
“Teva continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability.”
Other major drug-makers named in the 524-page lawsuit include New York City-headquartered Pfizer Inc., Ahmedabad, India-based manufacturer Zydus Pharmaceuticals and Brazil-based Novartis Group’s Sandoz division.
The legal action also cites 15 individual defendants, alleging that they utilized their relationships with contacts at competitor companies “to allocate markets and raise prices on overlap drugs.”
Defendants include Maureen Cavanaugh, former Teva senior vice president and commercial officer, North America; Marc Falkin, former Teva senior vice president, US generic sales; and David Rekenthaler, former Teva vice president of sales, US generics, and currently vice president of sales at another defendant, Toronto, Canada-based Apotex.
The plaintiff states are seeking damages, repayment of ill-gotten gains and court measures to prevent further anticompetitive actions.
Teva, currently the subject of wholesale restructuring and ambitious cost-cutting measures amid dropping revenues and high debt, currently manufactures approximately 550 FDA-approved generic products.
The company, which announced it would be cutting 14,000 jobs by the end of 2019, relied heavily on revenue from sales of Copaxone – priced at $5,800 and accounting for some 20% of sales – since 1996, when the drug was first released into the market.
Yet the company’s financial health deteriorated in July 2017, when Dutch-American pharmaceutical company Mylan N.V. cut the wholesale monthly cost of its generic version of the drug by 60% from $5,000 to $1,900.
The company forecasts, however, an end to decreasing revenues from 2020, as its two new drugs – Ajovy and Austedo – start to gain traction in the US pharmaceutical market.
As of March 31, 2019, Teva’s debt stood at $28.6 billion, compared to $28.9b. as of December 31, 2018 and $32.4b. at the end of 2017.