Opioids, price-fixing and now kickbacks. Prosecutors add another ‘enriching’ scheme to the claims against Teva
Teva Pharmaceuticals $TEVA is in legal trouble again, this time for allegedly defrauding Medicare.
On Tuesday, federal prosecutors sued the Israeli drugmaker, accusing them of paying hundreds of millions of dollars to two foundations as part of a scheme to boost sales for the blockbuster multiple sclerosis drug Copaxone. The suit comes after a series of legal challenges — largely over their role in the opioid crisis and in price-fixing schemes with other generic producers — that have helped knock Teva from its former position as one of the world’s top drugmakers.
The latest challenge knocked Teva’s shares down nearly 15% Tuesday, from $11.62 to $9.92, although it has already begun to rebound.
According to the complaint, filed in the US District Court of Massachusetts, from 2006 through at least 2015, Teva paid over $300 million in kickbacks to The Assistance Fund and the Chronic Disease Fund. These payments were ostensibly to support funds the foundations keep to help patients with co-pays, but the Justice Department alleges that Teva conspired with the groups to assure that a maximum amount of the donations went to Copaxone patients.
Those subsidies allowed Teva to more than quintuple the cost of Copaxone without having patients feel the brunt of those costs and turn to other drugs, prosecutors alleged, undermining the Medicare co-pays meant to act as a market-based check on drug prices. They said the actions violated federal legislation against kickbacks and meant that taxpayers shouldered the burden for Teva’s rising prices.
“Teva intended the payments to ensure that Copaxone patients never faced the steep prices that Teva charged for its drug, thus inducing the patients, including Medicare patients, to purchase the drug,” the lawsuit claims.
The scheme, they wrote, resulted in “increasing Copaxone sales and enriching Teva in amounts that far exceeded its payments to the foundations.”
The government is seeking damages, plus “recovery of all monies by which Teva has been unjustly enriched, including profits Teva earned because of illegal inducements.”
In statements to multiple media outlets, including Reuters and The Wall Street Journal, Teva said it would defend itself, adding that the lawsuit “only seeks to further restrict patients’ access to important medicines and healthcare.”
For years, Copaxone was a cash cow for Teva, fueling its rise from a generics producer to one of the world’s top drugmakers. At its peak, the drug earned Teva more than $3 billion in a single year.
The drug then played an instrumental role in Teva’s fall as, beginning in 2015, generics ate into the company’s market. Attempts at successor drugs and new blockbusters failed, and with the drugmaker quickly at the center of both price-fixing and opioid lawsuits and with generic drug prices falling, share prices fell from nearly $70 in 2015 to around $10 today.
Still, the company had been eyeing a turnaround of late. In 2017, they brought in a new CEO in longtime Novo Nordisk executive Kåre Schultz, who steered Teva to $4.5 billion in revenue last year — $100 million above expectations. In opioid negotiations, he has argued with apparent success that “we don’t have that much money,” reaching a settlement framework centered on donated anti-addiction drugs, with few cash payments.
In the spring, Teva walked away from negotiations over criminal price-fixing charges, threatening the case could put the company out of business and gambling that the US government would be unwilling to come down hard on a drugmaker during a pandemic.
And earlier this week, when states redoubled demands on opioid producers and announced plans to seek a $26.4 billion settlement, Teva was noticeably absent from the list.