Teva announces 'settlement in principle' regarding drug pricing lawsuits

JERUSALEM—On Feb. 5, Teva Pharmaceutical Industries Ltd. announcedthat several of its subsidiaries in the United States reached a settlement inprinciple to resolve claims brought by Ven-A-Care of the Florida Keys Inc. onbehalf of the United States, Texas, Florida, and California under federal andstate False Claims Acts.

Teva notes that "Together with many other pharmaceuticalmanufacturers," it is named in numerous civil lawsuits that relate to drugprice reporting by manufacturers in about 15 states in the United States. Ingeneral, they all allege that the prices reported by pharmaceutical companies ledvarious governments to pay inflated reimbursements for drugs under Medicaid orother healthcare programs. The many cases are pending in federal and statecourts alike, and Teva denies all the allegations.

However, upon execution of "definitive settlement documentsand certain government and court approvals," this settlement in principle will,Teva notes, "resolve a lawsuit relating to federal contributions to all stateMedicaid programs and claims of Texas, Florida, and California relating totheir Medicaid programs."

Although other cases are still pending, this three-statesettlement will reportedly eliminate the majority of the alleged damages thathave been asserted against Teva in the various drug pricing litigations.

Teva reports that it will record a charge of approximately$315 million in its 2009 fourth quarter results in connection with this settlement,and the charge includes both the settlement in principle and a reserve for theremaining drug pricing lawsuits to which Teva is a party. Teva did not say howmuch it will pay to resolve the lawsuits and how much will be placed inreserve.

Ven-A-Care is no stranger to filing claims such as these,and has gone after such heavy hitters as Bayer back in 2001, helping bringabout a $14 million settlement with the U.S. Department of Justice and 45states on allegations of inflated pricing of hemophilia and immune deficiencytherapies.

In 2000, the Texas Attorney General filed a lawsuit underthe Texas false claims statute against Schering-Plough, Dey Laboratories andBoehringer Ingelheim based in part on information provided by Ven-A-Care inrelation to Dey allegedly inflating the prices for some asthma inhalants. In2003, Dey and the Texas Attorney-General reached a settlement of $18.5 million.

One of the more recent targets of Ven-A-Care was AbbottLaboratories in 2009, accusing the company of reporting inflated prices forgeneric drugs containing the antibiotic erythromycin.

Taxpayers Against Fraud, a nonprofit group based inWashington, D.C., named Ven-A-Care its Whistleblower of the Year in 2006. "Thetruth is, these guys should win it every year," Patrick Burns, the group'sdirector of communications, told the FloridaKeys Keynoter in Marathon, Fla., in Dec. 2009. "What they have done istruly inspirational."

Teva may disagree of course about the inspirational part, havingwatched—in morning trading the day of its own settlement announcement—itsshares fall 48 cents to $57.44 per share.

Although Teva is headquartered in Israel, over 80 percent ofits sales are in North America and Europe. It touts itself as the world'sleading generic pharmaceutical company and places itself among the top 15pharmaceutical companies in the world.