IBI: Teva liability on price fixing could be $1b

Teva Photo: Sivan Faraj

Following a settlement just agreed by Taro, IBI analyst Steven Tepper estimates that Teva will have to pay hundreds of millions and maybe $1 billion to settle claims.

Following a price collusion settlement agreed by Taro Pharmaceutical Industries Ltd. (NYSE: TARO) at the end of last week, IBI Investment House senior analyst pharmaceuticals, biotechnology and medical devices Steven Tepper estimates that Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) will have to pay hundreds of millions and maybe $1 billion to settle price fixing claims against it.

Investigations have indicated that generic pharmaceutical manufacturers agreed between themselves to fix prices in the US and resulted in price hikes and a higher cost to US taxpayers.

Taro, which is controlled by Indian company Sun Pharmaceuticals and is based in Haifa, where it produces dermatological and other treatments, has agreed to pay $206 million to settle the matter and a further $213 million to settle federal civil cases. Taro's CEO is Israel Makov, a former Teva CEO.

Credit Suisse says that the amount paid by Taro is lower than expected because Sandoz (the generic division of Novartis) is paying $380 million and had exposure that was half that of Taro. Credit Suisse adds that Teva has not decided to settle yet. The 'New York Times" even reported two months ago that Teva's lawyers had broken off talks on the matter with the Antitrust Department of the US Ministry of Justice. The suggestion is that Teva is gambling on the fact that during the peak of the coronavirus crisis, the Trump administration would not want to come down hard on the biggest generic drug manufacturer in the US.

Tepper observes that Taro's settlement is the fifth such agreement reached with the US authorities after Sandoz agreed in March to pay $195 million for the criminal indictment and $185 million for civil cases."

Noting the reports that Teva had broken off talks on a settlement, Tepper wrote, "It is not clear what evidence the prosecutors have against Teva specifically and how justified is the confidence that Teva is demonstrating on the affair."

Tepper added, "The price fixing affair is a genuine and painful affair, and the number of those involved who are raising their hands and reaching a settlement is growing. Despite that, the extent of Teva's involvement and the strength of the evidence against it are not clear. But we must assume that at a certain stage Teva will also reach a settlement."

Published by Globes, Israel business news - en.globes.co.il - on July 26, 2020 © Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Teva Photo: Sivan Faraj
Teva Photo: Sivan Faraj
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