(CN) — The U.S. Department of Justice announced Thursday it has reached two settlement agreements worth $450 million with Teva Pharmaceuticals USA, one of the country’s largest generic drug manufacturers.
The larger $425 million agreement resolves claims that the company, a U.S. subsidiary of the Tel Aviv-based Teva Pharmaceutical Industries, used bogus charity donations to cover multiple sclerosis patients’ Medicare copays for over a decade, while simultaneously raising the the price of the multiple sclerosis drug Copaxone.
“For far too long, Teva gamed the charitable foundation process by paying kickbacks through two foundations, and with the aid of a specialty pharmacy. Those kickbacks undermined the purpose of the Medicare copay system and violated the Anti-Kickback Statute,” acting U.S. Attorney Joshua Levy for the District of Massachusetts said in a statement.
The federal government sued Teva’s American subsidiary in Boston in August 2020 over the kickback scheme, saying it had given over $300 million to two charitable patient organizations between 2006 and 2017: the Chronic Disease Fund — now going by Good Days — and The Assistance Fund. The government claimed in its suit that Teva would refer multiple sclerosis patients facing Medicare copays to a CVS-affiliated pharmacy known as Advanced Care Scripts, which would then arrange for the patients to receive copay coverage from the two charity funds.
While the Chronic Disease Funds and the Assistance Fund helped cover the patients’ Medicare copay costs, Teva was steadily making the drug itself more expensive. A congressional oversight committee released a report on Teva’s Copaxone-related finances in September 2020; the committee found Teva had increased the price of Copaxone 27 times since it launched the medication in 1997.
A yearly supply of the drug cost a little over $9,200 on average when it first hit the market, but by 2017 the same supply cost between $70,000 and $85,000 depending on the dosage formula. Copaxone was also Teva’s top-selling drug in 2017, bringing in over $3.8 billion in global revenue that year alone.
Teva’s goal, the government argued in 2020, was to boost Copaxone sales such that the company took in more profits from the drug than it paid out to the two charity organizations.
“Teva intended the payments to ensure that Copaxone patients never faced the steep prices that Teva charged for its drug, thus inducing the patients, including Medicare patients, to purchase the drug,” the Justice Department wrote in its complaint.
A spokesperson for Teva, however, maintained in a prepared statement that the company’s donations “supported MS patients’ access to critical medicines.”
The terms of Thursday’s agreement stipulate that Teva will pay the United States $425 million over the course of the next five years, with the government reserving the right to pursue over $1.8 billion against the company should it file for bankruptcy.
The smaller $25 million settlement resolves a separate government claim that Teva conspired with other drug manufacturers to fix prices for pravastatin, clotrimazole and tobramycin, used to treat high cholesterol, fungal infections and bacterial infections, respectively. That settlement comes on top of a related $225 million criminal penalty Teva agreed to pay in August 2023 as part of a deferred prosecution agreement with the Justice Department.
Teva admitted, as part of the 2023 deferred prosecution agreement, that a former employee “in three instances involving three separate customers between 2013 and 2015, agreed with competitors that Teva would not bid on an opportunity to supply that customer with a particular generic product.”
Teva did not admit wrongdoing in either of Thursday’s settlements.
“In both matters, Teva disputes that it caused false claims for reimbursement to be submitted to any government programs. Teva has a strong culture of compliance, and robust controls designed to prevent violations like those alleged in each of these two matters,” the company’s spokesperson told Courthouse News in an email.