Just days before a landmark trial connected with the U.S. opioid epidemic is set to begin in federal court in Cleveland, Teva Pharmaceuticals is reportedly asking to avoid a cash penalty payout and to compensate victims instead with free generic drugs.
Under the offer, reported by Bloomberg News on Tuesday, Teva would give away more than $15 billion in generics, including those that help fight opioid overdoses, to resolve all of its cases, over a 10-year period.
A Teva spokesman declined to comment to Bloomberg, but the news nevertheless sent shares of the Israeli drug maker soaring on the Tel Aviv Stock Exchange on Wednesday. In a shortened Succoth holiday trading session, the shares ended up 9.3% at 25.88 shekels ($7.32), their highest close in three weeks.
Teva is one of a group of big drug makers and distributors facing penalties for their alleged role in fueling the opioid crisis, in a trial scheduled to begin October 21. The epidemic, which the drug companies are accused of not trying to control, reportedly led to some 400,000 deaths from 1996 until 2017.
Media reports say that Johnson & Johnson has offered to pay $4 billion to settle the claims while distributors McKesson, Cardinal Health and AmerisourceBergen have offered to pay $18 billion.
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In contrast to those cash offers, Teva executives have told the attorneys general pursuing the case that the company’s enormous debt leaves it insufficient cash to cover a settlement. Instead, it is offering to distribute Narcan, an overdose drug, to people at no cost.
Six months ago, the U.S. Food and Drug Administration approved Teva’s application to start selling a generic version of Narcan, a nasal spray version of the opioid-overdose reversal agent Naxalone.
If all the proposals are accepted, the Cleveland trial likely will be put off given that the three distributors and Teva are the main defendants, unnamed sources told Bloomberg. In the trial, two counties are seeking reimbursement for the hundreds of millions in tax dollars spent on the fallout from opioid addictions and overdoses.
Teva CEO Kare Schultz, has not only been grappling with $25 billion in debt his predecessor in the job took on in buying Allergan’s generic drug business in 2015. In addition, Teva is struggling with declining sales and profitability as its best-selling multiple sclerosis drug, Copaxone, faces its first generic competition.
Two weeks ago Standard & Poor’s doubled the amount of money it said Teva could pay in settlements related to the opioids affair as well as a separate price-fixing case. Based on the company’s earnings before interest, taxes, depreciation and amortization in the first half of the year, Teva could absorb payments of up to $2 billion, S&P said. However, it warned that liabilities arising from the litigation could easily exceed that sum each month
Elizabeth Burch, a University of Georgia law professor specializing in product-liability law, told Bloomberg that Teva may be signaling with its offer for free drugs that it faces bankruptcy if it is turned down.
“I guess free drugs are better than nothing, but it’s not perfect,” Burch said. “The real question is whether the local governments want to keep this company out of bankruptcy by accepting this offer.”