In Largest Settlement Of Its Kind, Teva Will Pay $512 Million to Resolve Pay-to-Delay Case

Published: Apr 21, 2015

In Largest Settlement Of Its Kind, Teva Will Pay $512 Million to Resolve Pay-to-Delay Case
April 21, 2015
By Riley McDermid, Breaking News Sr. Editor

Israeli drugmaker Teva Pharmaceutical Industries will shell out the largest settlement of its type in history, $512 million, to settle claims that its subsidiary Cephalon, Inc. was involved in a “pay to delay” scheme. A lawsuit filed by drug wholesalers alleged that Cephalon paid generic drugmakers not to market their own brand’s cheaper drugs, which forced them to pay higher prices for anti-sleep medication Provigil.

“That’s a great result for consumers,” David A. Balto, an antitrust lawyer and a former Federal Trade Commission policy director, told the New York Times. “This was an agreement that was a pretty naked effort to take generic drugs off the market.”

The final details of the settlement, which must still be approved by a judge, came via a motion filed Friday with Judge Mitchell S. Goldberg of the United States District Court’s Eastern District of Pennsylvania.

The lawsuit alleged that Cephalon used “reverse payment settlements,” which were legal until 2013, when the U.S. Supreme Court said they raised anti-trust issues, to keep generic competitors off the market.

Overall, the company paid more than $200 million to other companies to keep their generic versions out of the public sphere until 2012—a deal that wholesalers alleged caused an unfair market advantage and kept Provigil from facing competition (and therefore lower pricing) in 2006.

“We were able to get six more years of patent protection,” said Cephalon’s then-chief executive, Frank Baldino, at the time. “That’s $4 billion in sales that no one expected,” according to a lawsuit filed against Cephalon by the Federal Trade Commission.

Cephalon, which was acquired by Teva in 2011, was clearly a party to these deals, said experts Monday.

“You had smoking-gun evidence in a way that you don’t often have in these big antitrust cases,” said Michael Carrier, a professor at the Rutgers School of Law — Camden.

It has been a big news week for Teva. The company said Tuesday will bid for generic drugmaker Mylan at an unsolicited price of around $40.1 billion, in an $82 a share in cash and stock deal that would be the biggest takeover attempt so far this year. That bid is 23 percent above Mylan’s closing price April 16.

Any eventual merger could mean more than $27 billion in revenue from the combined companies, although Mylan’s public rebuke of its suite April 17, in which it raised concerns about antitrust issues, continues to worry analysts.

Teva lost patent protection for multiple sclerosis drug Copaxone, for which Mylan makes a generic, last July after a U.S. Federal Appeals Court found the patent protecting the drug would expire in May 2014, not September 2015.

“The attraction for Teva is that this deal would immediately allow them to grow and reduce their exposure to the impending drop in Copaxone sales,” said Sam Fazeli, an analyst at Bloomberg Intelligence in London, told Bloomberg Tuesday. “We still would have to consider the ramifications of antitrust regulation.”

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