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Teva could face $700M in penalties in U.S. price-fixing case

  • The U.S. Department of Justice (DOJ) has formally charged Teva Pharmaceutical Industries (TEVA +2.2%) with conspiring to fix prices, rig bids and allocate customers for generic drugs.
  • According to an indictment filed in a Pennsylvania district court, the company participated in three conspiracies from at least as early as May 2013 until around year-end 2015.
  • Count 1 charges Teva with conspiring with Glenmark Pharmaceuticals, Apotex and others to increase prices for cholesterol med pravastatin and other drugs.
  • Count 2 charges the company with conspiring with Taro Pharmaceuticals U.S.A. and a former executive and others to increase prices, rig bids and allocate customers for generic drugs for arthritis, seizures, pain, skin conditions and blood clots (may include others).
  • Count 3 charges Teva with conspiring with Novartis (NVS +0.4%) unit Sandoz to increase prices, rig bids and allocate customers for generic drugs for brain cancer, cystic fibrosis, arthritis and hypertension (may include others).
  • Each offense carries a maximum statutory penalty of $100M for companies although the maximum fine could be increased to twice the derived gain or twice the loss suffered by victims of the crime if either amount is greater than $100M. If the alleged total amount Teva overcharged was $350M, then the maximum potentially penalty would be $700M.
  • Teva is the seventh company to be charged in the case. Five have been resolved via deferred prosecution agreements while one, Glenmark, is awaiting trial. Apotex agreed to pay $24.1M, Taro agreed to pay $205.7M (includes a settlement related to another antitrust conspiracy) and Sandoz agreed to pay $195M. All pleaded guilty to their roles in the malfeasance.
  • Shares only dropped 1% yesterday on the news that the DOJ was planning to file charges. Bargain hunters appear to be active today. Shares are up over 5% from the intraday low of $9.27. 

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