Teva Pharmaceuticals USA Inc. (Teva USA) and Teva Neuroscience Inc. (“Teva”) agreed to pay $450 million to resolve two matters that allege Teva violated the Anti-Kickback Statute (AKS) and the False Claims Act (FCA).

Teva is the largest generic drug manufacturer in the United States. The settlement resolved two alleged kickback schemes:

Medicare Cost-Sharing Scheme and Copay Assistance Foundations

First, Teva has agreed to resolve allegations in a complaint the United States filed in the District of Massachusetts in August 2020 charging Teva with a conspiracy to violate the AKS and FCA by paying Medicare patients’ cost sharing obligations (“co-pays”) for the multiple sclerosis drug Copaxone from 2006 through 2017, while steadily raising Copaxone’s price. According to the charges, Teva coordinated and conspired with multiple third parties, including a specialty pharmacy and two allegedly independent copay assistance foundations, to ensure that donations to the foundations were used specifically to cover the copays of Medicare Copaxone patients, which Teva knew was prohibited by the AKS, and that Teva thereby caused the submission of false claims to Medicare.

Teva gamed the charitable foundation process by paying kickbacks through two foundations, and with the aid of a specialty pharmacy. The kickback payments undermined the purpose of the Medicare co-pay system and violated the Anti-Kickback Statute. 

Since 2017, the United States has collected over $1 billion, in addition to the Teva settlement, from pharmaceutical companies that allegedly used third-party foundations as conduits to unlawfully pay patient copays. DOJ has also reached settlements with four foundations and a specialty pharmacy pertaining to those allegations. The Justice Department and the HHS-Office of Inspector General have taken the leading role in cracking down on these lucrative schemes involving charitable foundations and have brought multiple enforcement actions.

Medicare’s copay structure serves as a safeguard against the artificial inflation of drug prices. When a pharmaceutical company manipulates drug prices through collusion, or disguises kickbacks as charitable donations to subsidize copays for its own drugs, the integrity of the Medicare program is threatened.

Generic Drug Price-Fixing Conspiracy

Second, Teva agreed to resolve separate allegations that it conspired with other generic drug manufacturers to fix prices for pravastatin, a drug widely used to treat high cholesterol and triglyceride levels, as well as two other generic drugs, clotrimazole and tobramycin. Teva previously entered into a deferred prosecution agreement with the Justice Department’s Antitrust Division to resolve related criminal charges. Teva paid a criminal penalty of $225 million and admitted to conspiring with three other generic drug companies to fix prices on certain generic drugs. Under the civil settlement announced today, Teva agreed to resolve allegations that the benefits it received under its price fixing scheme constituted illegal kickbacks.

Teva will pay collectively $450 million to resolve the two kickback schemes. This payment is in addition to the criminal penalty paid by Teva USA under its deferred prosecution agreement. 

The settlement of Teva’s price fixing conduct is the seventh pertaining to allegations of price fixing involving generic drugs, with total recoveries exceeding $500 million.