Yesterday, California Attorney General Xavier Becerra announced a settlement yesterday of the allegations against three pharmaceutical companies, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) being the main one among them, that they had conspired in a "pay for delay" agreement to delay the launch of generic drugs in order to keep prices high. Under the settlement, the three companies will pay the State of California nearly $70 million.
Teva is paying $69 million, which Becerra says is the largest pay-for-delay settlement received by any state. Most of the money will be paid by Teva for paying to delay a generic narcolepsy drug, Provigil, from entering the market for nearly six years between 2006 and 2012. Teva acquired the drug when it bought Cephalon in 2011, so most of the delay occurred before Teva's ownership. More than $25 million of the settlement will go to a consumer fund for California residents who purchased Provigil, Nuvigil or Modafinil between 2006 and 2012. Becerra said such pay for delay agreements keep prices of drugs up to 90% higher than they would have been if there were generic alternatives.
Teva said the money would come from a pre-existing fund that was created in 2015 as part of its settlement with the US Federal Trade Commission over similar claims, and that it would not make any additional payments.
The second settlement, amounting to $760,000, is with Teva, Endo Pharmaceuticals and Teikoku Seiyaku unit Teikoku Pharma USA over keeping a genetic alternative to the pain patch Lidoderm from entering the market for nearly two years.
Teva said it was paying $200,000 to cover the state’s legal costs after settling similar federal claims earlier this year.
Teva has agreed not to enter into any pay for delay agreements for 10 years, which the company said was identical to its federal consent decree.
Last month, a court in Oklahoma approved an $85 million settlement with Teva of claims that the company had fueled the epidemic of addiction to opiate-based pain killers in the state together with Johnson & Johnson and Purdue Pharma.
Teva bought Cephalon in 2011 for $6.5 billion. It turned out to be one of Teva's less successful acquisitions. The company has made several write-downs of the value of drugs it acquired with Cephalon, and it has had to pay substantial sums to settle claims arising from acts committed by Cephalon before the acquisition. In 2016, for example, Teva signed a settlement with 48 states of the US under which it paid $125 million for damage caused by the delay in the introduction of generic competition to Provigil. Before that, Teva paid $1.2 billion to the US Federal Trade Commission as compensation to wholesalers, pharmacies and insurance companies that had overpaid because of the blocking of generic competition.
The current settlement in California is not especially high, but it comes at a difficult time for the company, as it struggles to reduce its debt.
Published by Globes, Israel business news - en.globes.co.il - on July 30, 2019
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