Teva Shares Tumble on Report of U.S. Price-fixing Probe

Bloomberg News report says first charges in wide-ranging investigation could come next month. News of the investigation comes at a sensitive time for the global drug industry, which has been stung by repeated charges of price gouging.

An employee collects newly-manufactured pills from a machine at the tablet production plant at Teva Pharmaceutical Industries Ltd.'s headquarters in Jerusalem, Israel, on Monday, Sept. 19, 2011.
Bloomberg

Shares of Teva Pharmaceuticals and other makers of generic drugs plunged on Wall Street on Thursday after Bloomberg News reported that a U.S. Justice Department investigation into price collusion could result in the first charges filed by the end of the year.

Bloomberg said the grand jury investigation, which began about two years ago, encompasses about a dozen companies and 25 different drugs. The charges could extend to high-level executives, Bloomberg said, citing unnamed sources.

Besides Teva, Israel’s biggest company and the world’s largest maker of generic drugs, two other Israel-related companies are reported to be part of the probe – Mylan, a U.S. company traded on the Tel Aviv Stock Exchange, and Taro Pharmaceuticals, which is headquartered in Haifa.

In addition, the British company Actavis, which Teva bought from Allergan in August for $40.5 billion, was listed among the companies investigators are looking at.

Shares of Teva ended down 9.6% to $39.17 in New York. Mylan was down 7.1% at $34.08 and Taro, a much smaller company with a market cap of $4 billion, had lost 7.3% to$93.67.

Other companies cited in the Bloomberg report were Lannett, Impax Laboratories, Covis Pharma Holdings Sarl, Sun Pharmaceuticals, Mayne Pharma Grou and Endo International’s subsidiary Par Pharmaceuticals

News of the investigation comes at a sensitive time for the global drug industry, which has been stung by repeated charges of price gouging. Most of the criticism has been directed at branded drugs, but generics maker Mylan came under fire in September for raising the price of its EpiPen, a device used to treat severe allergies, by six-fold since 2007 to $600 for a package of two.

Sources told Bloomberg that the probe into price fixing of generic drugs was fluid and charges may take longer to file. Generic drug makers, whose products account for 88% of all U.S. prescriptions, also face a civil price-fixing investigation by Connecticut Attorney General George Jepsen. He is seeking to lead a group of states to probe the industry.

Some of the companies named by Bloomberg have already disclosed that investigators have asked about certain drugs, most notably makers of digoxin, a heart failure drug, and doxycycline, an antibiotic.

Teva is not cited among them. Taro said in September it had received a subpoena for an unspecified drug.