US Congress grills Teva CEO on Copaxone price hikes

Kare Schultz / Photo: Cadya Levy, Globes

Kare Schultz was asked about the price of the multiple sclerosis treatment which rose tenfold between 1997 and 2017.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO Kare Schultz was one of several heads of large drug companies forced to testify to the US Congress House Committee on Oversight and Reform yesterday on exorbitant price hikes.

The questioning by video conference lasted for many hours and Schultz was asked many things about Teva's branded multiple sclerosis treatment Copaxone. Sales of the blockbuster drug were for many years responsible for a substantial part of the Israeli pharmaceutical company's revenue and profit.

Schultz became Teva CEO in November 2017 while the report deals with Copaxone sales between 2012 and 2017. Consequently Schultz was unable to answer many of the questions, pointing out that he was not CEO at the time. One of the Members of Congress told Schultz in frustration, "I thank you for answering 50% of the questions with I wasn't there."

Ahead of the hearing, Congress published a detailed report, which among other things documented the price rises of Copaxone and also connected the drug's sales to remuneration of senior executives at Teva.

The report said, "Between 2012 and 2017, Teva revenue from Copaxone in the US was over $3 billion a year on average, partly as a result of the decision by the company's senior executives to hike the price of the treatment from $3,475 per month to $5,382."

The report adds, "During that period Teva's senior executives received remuneration of more than $190 million."

The report also reveals a personal internal email from February 2017, which says that generic competition has been delayed and that is "good for cash flow, for debt repayment and distribution of your bonuses."

The data on Copaxone shows that its price rose tenfold between its launch in 1997 to $7,114 per month in 2017. "Bloomberg" reports that in answer to a question about this, Schultz said that he did not assume his position until November 2017 and that since then Teva has not raised the price of Copaxone. He added that the price fell 20% in net terms in 2018 and 2019. The price erosion occurred after the introduction of generic competition, which intensified at the end of 2017 when Mylan introduced its 40mg dose.

In August, the US authorities filed a lawsuit against Teva over allegations that it submitted false claims to the Medicare national health insurance program. In the lawsuit filed with the Boston District Court, the US Department of Justice charges that the Israeli pharmaceutical company violated the False Claims Act between 2006 and 2015 and paid two independent charitable funds more than $300 million to cover co-payments of Copaxone patients.

Congresswoman Rashida Tlaib questioned Schultz on this matter and Schultz responded that these charities were not designed to make money for Teva. But Tlaib said, "Your company makes 'charitable donations' in order to make it seem as if you care for the patients but in practice it's just another venture to make money from the patients."

Published by Globes, Israel business news - en.globes.co.il - on October 1, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Kare Schultz / Photo: Cadya Levy, Globes
Kare Schultz / Photo: Cadya Levy, Globes
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018