20 U.S. States Sue Israel's Teva Pharmaceuticals for Fixing Prices

Teva among six pharma companies alleged to have conspired over steak dinner, 'girls night out' events.

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Teva's headquarters in Jerusalem.
Teva's headquarters in Jerusalem.Credit: Bloomberg

Two years after high generic drug prices became a public controversy, legal cases are starting to land.

Twenty states filed a lawsuit Thursday against Israel’s Teva Pharmaceuticals and five other generic drug makers, saying they conspired over steak dinners and “girls nights out” on pricing of two common generic drugs, according to a copy of the complaint.

The civil lawsuit, led by antitrust investigators in Connecticut, comes one day after the United States Department of Justice filed criminal charges against two generic drug industry executives, alleging that they colluded to fix prices and split up market share.

Taken together, the cases are part of a broader generic drug pricing probe that remains underway at the state and federal level, as well as in the U.S. Congress. In 2014, media reports of sharply rising drug prices led to Congressional hearings.

“We believe that this is the tip of the iceberg,” Connecticut Attorney General George Jepsen told Reuters in an interview. “Price fixing in the generic industry is widespread and pervasive, and it involves many other drugs and a number of other companies.”

Several companies have publicly disclosed receiving subpoenas from the Justice Department related to generic drug pricing issues. Among them are Mylan, a U.S. company traded on the Tel Aviv Stock Exchange; Allergan, which later sold its generic business to Teva; and Taro Pharmaceuticals, an small Israeli company. Teva shares ended down 1% at 141 shekels ($36.39) in Tel Aviv on Sunday.

The drugs involved in Thursday’s lawsuit include the delayed-release version of a common antibiotic, doxycycline hyclate; and glyburide, an older drug used to treat diabetes. Doxycycline, for example, rose from $20 for 500 tablets to $1,849 between October 2013 and May 2014, according to Senator Amy Klobuchar, a Minnesota Democrat who had been pressing for action on high drug prices.

The lawsuit, filed in the U.S. District Court for the District of Connecticut, names Heritage Pharmaceuticals as a “ringleader” of the price manipulation, and also lists Mayne Pharma, Aurobindo Pharma and Citron Pharma as participants. The two executives charged in Wednesday’s Justice Department filing were from Heritage.

According to the complaint, Heritage, Teva, Aurobindo and Citron conspired to raise prices on glyburide; Heritage, Mylan and Mayne conspired to allocate and divide the market for doxycycline.

Heritage has blamed the former executives for the price-fixing, and said they had been terminated.

Mylan denied the charge. “To date, we know of no evidence that Mylan participated in price fixing,” spokeswoman Nina Devlin said by email.

Teva spokeswoman Denise Bradley said the company has “not found evidence that would give rise to any civil or criminal liability.”

The other three companies had no immediate comment.

The lawsuit alleges that drug companies either set prices or allocated markets to prop up prices. Employees knew the conduct was illegal and either deleted emails or made efforts to avoid communicating in writing, the lawsuit alleges.

The attorneys general asked the court to order the companies to disgorge ill-gotten gains, which were not defined, pay attorneys’ fees and stop collusion.

Some of the alleged collusion occurred at industry conferences and dinners, the complaint said. Female sales representatives gathered for a “girls night out” where they discussed sensitive information, the complaint says.

In one case, it says that Mylan agreed to “walk away” from one large national wholesaler and one large pharmacy to allow Heritage to win business.

Malek, it says, was in charge of communicating with Teva, and he was able to reach a deal to raise prices on glyburide, the suit alleges.