- The attorneys general of 44 states on Friday sued 20 generics manufacturers and 15 employees on price-fixing charges, appearing to focus on the practices of Teva as instigator of a conspiracy. The company says it “has not engaged in any conduct that would lead to civil or criminal liability.”
- The charges cite an internal Teva competitor ranking system that assessed whether fellow generics companies would raise prices when Teva did. The attorneys general claim that the prices of more than 100 drugs were artificially inflated thanks to the practices of Teva, Novartis’ Sandoz unit, Pfizer, Mylan and others between 2012 and 2015.
- News of the lawsuit was another blow to the price-pressured generics sector generally, and struggling Teva specifically, raising questions of how the Israeli pharma will balance cash needs should it be forced to pay a settlement. Shares of publicly traded generics companies charged in the lawsuit fell, with Teva down 14%, Mylan off 8% and Lannet losing 15%.
Price competition among manufacturers selling generic drugs is supposed to be a cost counterweight to expensive, patent-protected branded pharmaceuticals. However, the attorneys general of 44 states charge that this was not the case for 114 different drugs, which the lawsuit claims were subject to price-fixing practices by 20 manufacturers.
The lawsuit focuses closely on the practices of Teva, claiming that an “overarching conspiracy” characterized as an “agreed-upon code that each competitor is entitled to its ‘fair share’ of the market, whether that market is a particular generic drug, or a number of generic drugs.” It documents 12 such arrangements between Teva and other generic companies covering 41 drugs, ranging from cholesterol-lowering drug fenofibrate to copycat versions of the HIV drug Combivir (lamivudine/zidovudine).
In response, Teva said in a statement: “The allegations in this new complaint, and in the litigation more generally, are just that — allegations. Teva continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability. We will continue to vigorously defend the Company.”
According to the charges, Teva had conducted internal analyses ratings on which drugs they would be able to successfully raise prices, based on the number of competitors and the quality of their relationships with those companies. Mylan, Novartis’ Sandoz unit, Glenmark, Taro and the Actavis generics unit acquired by Allergan and later sold to Teva were all rated highest in this analysis, and others joined based on their willingness to cooperate, the lawsuit says.
Teva, which is struggling to pay off a $28 billion debt load it amassed through buying Allergan’s generics business, now could potentially face another demand on its cash in the form of a settlement with the states.
“While it is hard to quantify what Teva’s potential liability could be at this point, we believe any potential settlement would be manageable for Teva and take into consideration the important role generic drugs play in managing drug spending in this country, as well as Teva’s current debt load,” Credit Suisse analyst Vamil Divan wrote in a May 13 note to clients.
The lawsuit also charges other companies made deals that didn’t involve Teva, including Sandoz and Mylan.
In response to the lawsuit, Novartis said: “We believe that these claims are without merit and will vigorously contest them. Sandoz takes its obligations under the antitrust laws seriously.”
Pfizer similarly stated, “We do not believe the Company or our colleagues participated in unlawful conduct and deny any wrongdoing.”