In the coming days, the Justice Department will make an important decision: whether to file criminal charges against one of the world’s largest pharmaceutical companies for allegedly colluding with rivals to inflate the prices of widely used drugs.
It is a high-stakes gamble that could affect millions of Americans who rely on Teva’s dozens of inexpensive generic drugs, as well as its brand-name products like Copaxone, for multiple sclerosis, and Ajovy, for migraines. Teva officials say criminal charges could cripple the Israeli company and potentially leave it unable to sell drugs to federal programs like Medicare.
For years, the Justice Department and state prosecutors have been investigating what they describe as a conspiracy by pharmaceutical companies to increase the prices of popular drugs. The department has already extracted guilty pleas and $224 million in penalties from four other drug companies.
Lawyers for Teva, which prosecutors believe was deeply involved in the conspiracy, until recently had been holding settlement negotiations with officials in the Justice Department’s antitrust division. But in April, the company all but walked away from the talks, essentially daring the Trump administration to file charges, according to people on both sides of the discussions.
Teva officials have said that the company did nothing wrong and that they plan to vigorously defend themselves.
A Justice Department spokesman declined to comment.
Teva executives and board members believe that one reason the Trump administration will back down is to avoid the impression that it is harming a company that is helping the United States fight the coronavirus.
A week or two before Teva’s lawyers pulled out of the settlement talks, a board member, Roberto Mignone, reached out to the White House to discuss the company’s efforts to provide drugs that might help treat the coronavirus.
President Trump had been touting an anti-malaria drug, hydroxychloroquine, as a possible “game changer” in the fight against the coronavirus. Teva was among the companies that made hydroxychloroquine overseas and could export it to the United States. It had already donated millions of hydroxychloroquine pills to American hospitals.
On March 24, Mr. Mignone emailed a former college roommate of Jared Kushner, Mr. Trump’s son-in-law and senior adviser. He wrote that Teva wanted the White House to help get the company’s hydroxychloroquine supplies out of India and to permit Teva to coordinate with rival drug companies to make and distribute the drugs.
In an ensuing discussion with officials on the White House’s coronavirus task force, Teva positioned itself as a valuable partner in the manufacturing and distribution of potential medical treatments for the coronavirus, according to people familiar with the discussions, who weren’t authorized to speak publicly about them. (In the weeks since, the results of several studies have dampened enthusiasm for hydroxychloroquine, and Mr. Trump has stopped emphasizing the drug.)
Teva officials said there was no connection between the White House conversation and the yearslong antitrust investigation.
But, said Robert Field, a professor of law and health policy at Drexel University, “it’s hard to believe that Teva does not have that in mind and does not see some kind of absolution in producing a drug that might help us come out of a national nightmare while they are facing quite serious criminal charges.”
Ronny Gal, a research analyst who follows the generic drug industry at the brokerage Bernstein, said Teva and other generic companies had seen working with the Trump administration as an opportunity not because more sales of hydroxychloroquine would be profitable — pills cost pennies — but because “they want to be viewed as a partner.”
“It’s your chance, at a relatively low cost, to have a very large P.R. campaign,” he added.
Teva had its conversation with the White House just as the company’s officials were reconsidering their settlement negotiations with the Justice Department, which along with other government bodies has for years had Teva in its cross hairs.
The investigation centers on allegations that Teva and a number of rivals illegally worked together to increase prices for widely used generic drugs like pravastatin, which is used to treat high cholesterol.
Congressional investigators have found that Teva dominated the market for some of the drugs whose prices inexplicably rose and remained high. And nearly every state attorney general and the Justice Department’s antitrust division have identified Teva as a leading player in the alleged price-fixing conspiracy.
Teva executives and board members view the federal case as overly reliant on a single former Teva employee who has struck an immunity deal with the government, according to people familiar with their thinking.
But they also feared an indictment, which would be likely to crush the company’s stock price. A criminal conviction would bar Teva from selling drugs to federal health care programs for at least five years. Avoiding such an outcome was a top priority for Teva, and a settlement seemed close at hand this spring, according to the people on both sides of the negotiations.
The Justice Department was inking settlements with other players in the alleged price-fixing conspiracy. In March, the government announced a deal with the Novartis subsidiary Sandoz, another major generic drugmaker. Sandoz admitted to criminal charges and agreed to pay a $195 million fine, the largest ever in a U.S. antitrust case. Last week, another company, Apotex, agreed to a $24 million settlement.
In mid-April, lawyers for Teva told officials in the antitrust division that they didn’t see a point in continuing with settlement negotiations based on their current trajectory, according to two people involved in the company’s internal discussions.
At a board meeting last week, Teva’s directors, lawyers and executives decided to stick with their legal strategy. With the statute of limitations on the case expiring soon, they doubted that the department would dare to charge the company.
Because Teva makes 10 percent of oral generic drugs prescribed in the United States, Mr. Gal said, it has significant leverage in negotiating with the federal government, especially during the pandemic, when the supply of some drugs has been strained. The company has “a level of protection, where the U.S. certainly does not want the company to go bankrupt,” he said.
Justice Department officials haven’t given up hope that settlement talks might resume before the statute of limitation expires in the next two weeks, at which point the government needs to decide whether to charge Teva or let the company walk.
A Justice Department lawyer, who wasn’t authorized to speak publicly about an active investigation, said that while prosecutors were wary of seriously harming a major drug company in the heat of a pandemic, they were also worried about giving a company a pass for illegal behavior simply because of a national emergency.
Jesse Drucker contributed reporting.