Drug Maker Teva Pharmaceuticals Agrees to Pay $450M in False Claims Act Settlement to Resolve Kickback Allegations Relating to Copayments and Price Fixing

Teva Pharmaceuticals USA Inc. (Teva USA) and Teva Neuroscience Inc. (collectively, Teva) have agreed to pay $450 million to resolve two matters that allege Teva violated the Anti-Kickback Statute (AKS) and the False Claims Act (FCA). Teva, headquartered in Parsippany, New Jersey, is the largest generic drug manufacturer in the United States. The settlement amount was based on Teva’s ability to pay.

“Kickbacks designed to induce referrals or purchases of healthcare goods or services distort physician and patient decision-making, thwart competition and bypass controls put in place to protect federal health care programs,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The Justice Department is committed to pursuing those who engage in kickback violations, including drug manufacturers, to ensure that federal health care programs continue to serve the interests of taxpayers and program beneficiaries.”

The settlement encompasses two alleged kickback schemes. First, Teva has agreed to resolve allegations in a complaint the United States filed in the District of Massachusetts in August 2020 that Teva violated and conspired to violate the AKS and FCA by paying Medicare patients’ cost sharing obligations (copays) for the multiple sclerosis drug Copaxone from 2006 through 2017, while steadily raising Copaxone’s price. In particular, the United States alleged that Teva coordinated and conspired with multiple third parties, including a specialty pharmacy and two allegedly independent copay assistance foundations, to ensure that purported donations to the foundations were used specifically to cover the copays of Medicare Copaxone patients, which Teva knew was prohibited by the AKS, and that Teva thereby caused the submission of false claims to Medicare.

Second, Teva USA has agreed to resolve separate allegations that it conspired with other generic drug manufacturers to fix prices for pravastatin, a drug widely used to treat high cholesterol and triglyceride levels, as well as two other generic drugs, clotrimazole and tobramycin. Teva USA previously entered into a deferred prosecution agreement with the Justice Department’s Antitrust Division to resolve related criminal charges. Teva USA paid a criminal penalty of $225 million and admitted to conspiring with three other generic drug companies to fix prices on certain generic drugs. Under the civil settlement announced today, Teva agreed to resolve allegations that the benefits it received under its price fixing scheme constituted illegal kickbacks.

Teva will pay collectively $450 million to resolve the two kickback schemes. This payment is in addition to the criminal penalty paid by Teva USA under its deferred prosecution agreement. 

“Kickback arrangements by pharmaceutical companies escalate the costs for critical drugs used by our citizens and federal health care programs,” said U.S. Attorney Jacqueline Romero for the Eastern District of Pennsylvania. “My office is proud to work with the rest of the Department of Justice and our investigative partners to enforce federal laws prohibiting kickback arrangements. We will continue to take action to lower the drug costs for our country and its health care programs supporting senior citizens, our military service members and others.”

“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 co-pay system and violated the Anti-Kickback Statute,” said Acting U.S. Attorney Joshua S. Levy for the District of Massachusetts. “This office has taken the leading role in cracking down on these highly lucrative schemes that drive up the cost of essential drugs by bringing multiple enforcement actions that have returned more than $1 billion to the Medicare system. We will continue to pursue these actions to ensure that all pharmaceutical companies play by the rules and to protect the American taxpayers.

“The Medicare program’s copay structure serves as a safeguard against the artificial inflation of drug prices. When a pharmaceutical company manipulates drug prices through collusion, or disguises kickbacks as charitable donations to subsidize copays for its own drugs, the integrity of the Medicare program is jeopardized,” said Assistant Inspector General for Investigations Adam Globerman of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “This type of conduct is unacceptable, and HHS-OIG remains committed to thoroughly pursuing allegations of price fixing and kickbacks that put the Medicare program at risk.”

“The Defense Criminal Investigative Service, the law enforcement arm of the Department of Defense Office of Inspector General, seeks to protect the integrity of TRICARE, the healthcare system for U.S. military members and their dependents,” said Special Agent in Charge Patrick J. Hegarty of DCIS Northeast Field Office. “When pharmaceutical corporations artificially inflate prices, they place an unnecessary financial burden on the TRICARE program. The settlement agreement announced today demonstrates our commitment to partner with investigative agencies and the Department of Justice, including the Civil Division and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, to combat healthcare fraud.”

Since 2017, the United States has collected over $1 billion, in addition to today’s settlement, from pharmaceutical companies that allegedly used third-party foundations as conduits to unlawfully pay patient copays. The department has also reached settlements with four foundations and a specialty pharmacy pertaining to those allegations. Today’s resolution with Teva is the largest of these settlements to date. The settlement of Teva’s price fixing conduct is the seventh pertaining to allegations of price fixing involving generic drugs, with total recoveries exceeding $500 million.

The government’s pursuit of these matters illustrates the department’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800‑HHS‑TIPS (800-447-8477).

The resolution of the patient copay matter was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section, and U.S. Attorney’s Office for the District of Massachusetts, with investigative support from HHS-OIG and the FBI.

Attorneys Douglas Rosenthal and Nelson Wagner of the Civil Division’s Fraud Section and Assistant U.S. Attorneys Abraham R. George, Diane Seol and Evan Panich for the District of Massachusetts handled the matter.

The civil resolution of the price fixing matter was the result of a coordinated effort between the Fraud Section and the U.S. Attorney’s Office for the Eastern District of Pennsylvania, with investigative support from HHS-OIG, the Defense Health Agency Program Integrity Office, DCIS and Office of Inspector General for the Department of Veterans Affairs.

Senior Trial Counsel Jennifer L. Cihon and Senior Litigation Counsel Laurie A. Oberembt of the Civil Division and Assistant U.S. Attorneys Landon Y. Jones III, Rebecca S. Melley and Anthony D. Scicchitano for the Eastern District of Pennsylvania handled the matter. Fraud Section financial analyst Sheryl Paynter provided support for both matters.

The civil action in Massachusetts is captioned United States v. Teva Pharmaceuticals USA, Inc. et al., No. 20-cv-11548 (DMA).  

DMA Settlement

EDPA Settlement