Teva Reaches $1.2 Billion 'Pay-for-delay' Settlement Over Provigil

Cephalon – bought by Teva in 2011 – had been accused by regulators of illegally protecting its monopoly on Provigil by paying off generic drug makers.

Adam Reynolds/Bloomberg

Teva Pharmaceuticals (TASE, Nasdaq: TEVA) has reached a $1.2 billion settlement deal with U.S. antitrust regulators over alleged misdoing by Cephalon – a pharmaceutical company purchased by Teva in 2011 for the same sum - accused of paying off drug manufactures to postpone the release of a generic alternative to its leading drug - Provigil.

According to the Federal Trade Commission, as part of the settlement, Teva will refund buyers who paid too much for Provigil and will to refrain from similar deals in the future.

Some buyers, including wholesalers and insurance companies, have reached court settlements in the dispute, and that money will count toward the $1.2 billion. The FTC will receive some additional money, but not much, according to a source familiar with the agreement who asked not to be named.

Cephalon had been accused by the FTC of illegally protecting its monopoly on Provigil by paying generic drug makers to drop their challenges to Cephalon's patent.

This is often called a "pay-for-delay" agreement since the brand name drugmaker pays a generic maker to delay entering the market.

"Today's landmark settlement is an important step in the FTC's ongoing effort to protect consumers from anti-competitive pay for delay settlements, which burden patients, American businesses, and taxpayers with billions of dollars in higher prescription drug costs," said FTC Chairwoman Edith Ramirez.

Teva said in a statement that the delay agreements that prompted the FTC probe occurred in 2005 and 2006, before it purchased Cephalon.

"We are pleased to have reached an agreement with the government. In relation to the consent decree, Teva believes it is the right path for our company, for the industry and for the patients we serve," Teva said.

Reuven Kopitchinski

The FTC has fought pay for delay deals for more than 10 years. The agency has pushed for legislation to ban the patent agreements or make it easier for the FTC to challenge them.

This opposition got a boost when the Supreme Court ruled in 2013 that the FTC could pursue pay-for-delay drug cases as potentially illegal.

The decision also likely contributed to Teva's decision to settle, said Michael Carrier, who teaches antitrust at Rutgers School of Law. "Teva realized there was a significant chance it would have been found guilty of violating the antitrust laws," he said.

The commission voted 5-0 to approve the settlement.

Reuters contributed to this report