U.S. Justice Department Sues Teva Over Alleged Drug Kickbacks

Yoram Gabison
Yoram Gabison
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A Teva Pharmaceutical Industries building in Jerusalem, Israel, December 14, 2017.
A Teva Pharmaceutical Industries building in Jerusalem, Israel, December 14, 2017. Credit: Ammar Awad/ REUTERS
Yoram Gabison
Yoram Gabison

The U.S. Justice Department sued Israel's Teva Pharmaceuticals on Tuesday, accusing the drugmaker of causing the submission of false Medicare claims by using kickbacks to boost sales of its multiple sclerosis drug Copaxone.

In a complaint, the Justice Department said Teva illegally paid two apparently independent charitable foundations more than $300 million from 2006-15 to cover the copayments of Copaxone patients, shielding them from a quadrupling of Copaxone’s price to $73,326 a year.

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The news caused Teva’s New York Stock Exchange-traded shares to fall more than 13% to $10.06 early afternoon local time.

The Justice Department said Teva’s actions circumvented the law’s goal of using copayments to help keep drug prices down and yielded the company hundreds of millions of dollars in revenue.

“As alleged, Teva gamed Medicare and tried to deflect attention away from a 329% increase in the cost of its drug by masking kickbacks as charitable contributions,” Joseph R. Bonavolonta, special agent in charge of the FBI’s Boston Division, said in a statement.

Teva said it would vigorously defend itself, saying the lawsuit “only seeks to further restrict patients’ access to important medicines and healthcare.” Drugmakers are barred from directly subsidizing copayments for Medicare patients, but they can donate to independent nonprofits that offer copayment assistance.

Copaxone, which is used to treat multiple sclerosis, was a major source of Teva’s profits and revenues for two decades before its patent expired, opening the market to generic competition.

According to the complaint, Teva referred Copaxone patients to the Florida-based specialty pharmacy Advanced Care Scripts, which then arranged copayment coverage from the Chronic Disease Fund and The Assistance Fund.

The suit alleges that ACS coordinated with Teva the referral of new Copaxone patients to the foundations, referring patients in batches at the same time that Teva made payments to the foundations. Patients who were prescribed competing MS treatments were as a rule not given copay assistance by the funds.

The United States is seeking penalties and damages equal to three times Teva’s profits from the alleged scheme.

The CEO of Teva Pharmaceutical Industries Kare Schultz speaks during a news conference in Tel Aviv, Israel, February 19, 2019. Credit: AMIR COHEN/ REUTERS

ACS last week agreed to pay $3.5 million to resolve allegations it served as a conduit for a Teva. The United States has been investigating drugmakers’ financial support of charities that has led to nearly $921 million in settlements.

Teva has been involved in multiple high-profile legal cases in the United States, including a price-fixing lawsuit in 40 states, and a major scandal linked to the sale of opioids. Despite this, the company has managed to keep afloat, and even gained some respite from the coronavirus crisis.

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