Teva Engages In Settlement Talks Over Medicare Kickback Allegations

Teva Pharmaceutical Industries Ltd TEVA is reportedly in active discussions to settle a lawsuit with the U.S. Department of Justice (DOJ).

The lawsuit alleges Teva used charitable organizations to cover Medicare patients’ out-of-pocket costs, effectively paying kickbacks to boost sales of its multiple sclerosis drug, Copaxone.

Citing a filing, Reuters noted the company is requesting the Boston-based 1st U.S. Circuit Court of Appeals to delay its upcoming appeal hearing.

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The appeal is against a ruling regarding the government’s burden of proof in establishing violations of the False Claims Act, which prohibits defrauding government programs and allows recovery of taxpayer money through civil cases.

In the Reuters report, Teva’s lawyers stated, “The parties are actively engaged in settlement negotiations, and Teva is optimistic that the parties can reach a resolution, but additional time is needed to do so.”

This case is part of a broader investigation into drugmakers’ financial support of patient assistance charities, which has led to over $1 billion in settlements involving 12 drugmakers, four charities and one pharmacy.

The DOJ lawsuit against Teva, filed in 2020, alleges the company faces potential triple damages under the False Claims Act, amounting to as much as $10 billion. Teva has denied any wrongdoing.

Pharmaceutical companies are prohibited from subsidizing co-payments for Medicare patients. However, they can donate to independent non-profits providing co-pay assistance. The government contends that Teva and other drugmakers used these charities to illegally pay Medicare patients’ co-pay obligations, violating the Anti-Kickback Statute.

The lawsuit claims Teva paid over $350 million to the Chronic Disease Fund and The Assistance Fund between 2006 and 2017 to cover co-payments for Copaxone patients.

The DOJ argues that the move transformed these charities into conduits for kickbacks, driving up the drug’s price from $17,000 to about $85,000 per year.

In 2017 alone, Copaxone generated $3.8 billion in revenue for Teva.

The investigation into these practices began amid increasing scrutiny of rising drug prices. Co-payments are partly designed to expose patients to the true cost of medicines, acting as a check on healthcare expenses.

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Price Action: TEVA shares are down 0.67% at $17.02 at last check Tuesday.