Preliminarily Approval of Teva $420 Million Generic Drug Price Fixing Settlement

On January 27, 2022, the U.S. District Court for the District of Connecticut gave preliminary approval to a $420 million all-cash deal to settle claims from a class of investors over misrepresentations related to the value of Teva’s generics drug business, which has been the subject of numerous investigations and lawsuits over far-reaching market allocation and price fixing practices. The court has scheduled a fairness hearing for June 2, 2022. Teva has stated that the majority of the settlement amount will be paid trough insurance. A certified investor class asked for approval of the settlement earlier this month, noting that the deal would be the Connecticut district’s second-largest securities class action settlement.

The lawsuit was based on allegations that executives told analysts at various times that profit increases were driven not by price hikes but by efficiency measures and shrewd business decisions. Executives had misleading stated that Teva’s profits were achieved despite significant competition in the generics market, when in fact Teva and its competitors were engaged in an industry wide price-fixing scheme. The financial consequences for investors were significant, as Teva’s shares fell from a Class Period-high of over $72 to just $18.59. Teva cut its long-standing dividend by 75%, and the credit rating on its massive $30 billion in debt was immediately downgraded to one notch above junk. Teva’s fraud began to be revealed through a series of negative disclosures as the investigations targeted Teva, who then reported poor financial results, and Teva’s executives began to be terminated.

The U.S. Department of Justice hit Teva with an indictment in August 2020 for its alleged part in three price-fixing conspiracies between May 2013 and December 2015. The criminal charges came as part of a larger investigation of the generics industry that has seen five companies reach agreements with the DOJ. Various state attorneys general, putative classes, and health care payors , in a multidistrict litigation proceeding pending in the U.S. District Court for the Eastern District of Pennsylvania, allege that Teva and dozens of other generic manufacturers colluded for years to fix the prices of generic drugs by: (1) agreeing to increase prices in unison; and (2) allocating the market by trading off customers to ensure that each of the manufacturers selling a particular generic drug had its “fair share” of the market as determined by order of entry.

Schneider Wallace Cottrell Konecky represents several direct action plaintiff health plans in the Pennsylvania MDL.

In Re Teva Securities Litigation, No. 3:17-cv-00558 (D. Conn.)