Already hit hard by copycat versions of its branded multiple sclerosis drug Copaxone and struggling with debts of an estimated $29 billion, the Israeli pharmaceutical company Teva is in trouble. So far this year, its share prices are over a third lower than they were 12 months ago. The news that it had been cited in a US lawsuit regarding fraud and price-fixing caused their share prices to plummet even further. Financial experts have consulted Biz Community to find out how this lawsuit could affect them.
The 500-page lawsuit, filed by the Connecticut Attorney General, William Tong, is the result of a 5-year investigation. Mr Tong claims that the state has hard evidence that Teva Pharmaceuticals, along with 19 other companies, conspired to raise the prices of generic medicines by up to 1,000%. There are over 100 generic medicines mentioned in the lawsuit as well as at least 80 others. They include tablets, capsules, creams and ointments for conditions such as diabetes, cancer, epilepsy and high blood pressure.
Although generic medicines should be manufactured – and sold – more cheaply because they are no longer patented, this is not always the case. Pharmaceutical companies have a long history of making ‘gentlemanly agreements’ to ensure that each company receives their fair share of the market. However, from 2012 Mr Tong says that they have proof that these 20 companies overstepped the line. The documentation includes copies of emails, text messages, phone records as well as testimony given by former employees of the companies involved which covers the period July 2013-January 2015 and suggests conspiracy to keep prices artificially high.
Apart from the involvement of these 20 firms, 15 individuals have been named in the lawsuit as being responsible for ensuring the scheme of inflating prices worked well to the satisfaction of everyone.
With healthcare prices in the US among the highest in the world, generic medicines have always been seen as one of the ways to keep costs down. This lawsuit also comes at a time when Americans are concerned about the prices of healthcare. This alleged conspiracy has been characterised as an example of corporate greed at the expense of sick Americans across over 40 states. Some patients even have to take out a personal loan online in order to pay for their medical expenses. Apply now to find out more.
A representative for Teva denied any charges of wrongdoing although its co-defendants in the lawsuit have yet to make official statements. The lawsuit seeks damages as well as civil penalties. If found guilty, the firms involved could face fines for misconduct. There is also concern that honest competition should be restored to the industry.
Financial experts ask if Teva Pharmaceuticals will be able to weather this storm. Although there are high hopes for the new drugs it has been developing (Ajovy for migraines and Austedo for Huntington’s disease), they wonder whether plummeting share prices, huge debts and falling sales will spell the end of the company.