NEW YORK (BLOOMBERG) - Teva Pharmaceutical Industries Ltd. was charged by the US with conspiring with competitors to raise prices for generic drugs, the most significant case to come out of a yearslong investigation of price-fixing by pharmaceutical companies.
Teva's US unit was indicted on charges of participating in three conspiracies to fix prices and allocate customers from May 2013 to December 2015, the Justice Department said on Tuesday (Aug 25).
Teva, the world's largest generic-drug maker by market value, is the most high-profile company to be charged in the Justice Department's probe into allegations that companies conspired with one another to prop up the prices of certain widely used medications. Nine of every 10 prescription drugs dispensed in the US are generics.
Five other companies have settled charges and agreed to pay a total of US$426 million (S$582.7 million)in criminal penalties, while a sixth was charged in June.
"Today's charge reaffirms that no company is too big to be prosecuted for its role in conspiracies that led to substantially higher prices for generic drugs relied on by millions of Americans," Makan Delrahim, the head of the department's antitrust division, said in a statement.
Teva's US-traded shares fell as much as 6 per cent after Bloomberg News reported earlier on Tuesday that the government was planning to charge the company. The shares closed down less than 1 per cent at US$9.54.
The case came after Teva, which is based in Israel, rebuffed a settlement that would have required paying a criminal penalty and admitting wrongdoing, according to a person familiar who declined to be named because the investigation is confidential.
Chief executive officer Kare Schultz said in an interview earlier this month that Teva didn't engage in price-fixing and that the company was prepared to fight any charges. Mr Schultz said the company wouldn't agree to an accord that could limit the company's ability to sell products in the US
The Justice Department's antitrust division, which is conducting the investigation, had offered Teva a settlement known as a deferred prosecution agreement, according to a person familiar with the matter. Such resolutions suspend charges but require a company to admit wrongdoing and cooperate in the investigation.
Teva told the government it would only accept a non-prosecution agreement that doesn't require the drugmaker to admit wrongdoing, the person said.
Admitting to wrongdoing would expose Teva to a potentially costly settlement in pending civil litigation against the company tied to the price-fixing allegations. Investors have long aired their concerns about Teva's mounting legal exposure in both the generic price-fixing probes, as well as separate suits alleging the company played a major role in the opioid epidemic.
Teva is strapped for cash as it attempts to reduce its more than US$26 billion debt load. In October, the company offered to settle thousands of opioid lawsuits in the US through a US$250 million payment along with a donation of drugs valued at US$23 billion. Experts have said a settlement is still years away, and that the offering of a drug donation is a means for the company to avoid a hefty cash payment.
Mr Schultz told investors earlier this month that Teva's liabilities remain difficult to model, though Teva will do its best to avoid "insurmountable financial damage."
In addition to the US case, Teva and other generic-drug makers are grappling with civil lawsuits from a nationwide group of state attorneys general that accuse the companies of colluding to rig prices of drug and allocate customers. One of the lawsuits portrays Teva as masterminding a conspiracy with competitors that led to inflated prices on more than 100 different drugs.
