By Brent Kendall
WASHINGTON-- Teva Pharmaceutical Industries Ltd. will pay $1.2
billion to settle government allegations its Cephalon subsidiary
paid generic-drug makers to delay competing versions of the
sleep-disorder drug Provigil.
The Federal Trade Commission unveiled the settlement Thursday
morning, marking the first time the FTC has obtained monetary
remedies for drug purchasers in a "pay for delay" case.
Teva's price tag for the settlement will include credit from
private settlements the company has already agreed to pay in
similar Cephalon-related litigation, including a $512 million
settlement in April. That means the company's new financial
commitment in the FTC deal is considerably less than the full $1.2
billion amount.
The FTC will hold the settlement money in an escrow account that
will be available to compensate drug purchasers, including
wholesalers, pharmacies and insurers, who overpaid for the drug,
the commission said.
In another portion of the settlement, Teva agreed not to enter
into similar types of drug industry agreements in the future that
can postpone the introduction of generic drugs.
The settlement comes ahead of trial proceedings that were
scheduled to begin Monday in a Philadelphia federal court.
The Wall Street Journal reported earlier Thursday that the
settlement was imminent.
The agreement is a milestone in the FTC's long-running campaign
to stop deals in which brand-name drug makers pay generic-drug
competitors to drop patent lawsuits that could lead to the earliest
possible market entry of lower-cost generic medicines.
The FTC has had mixed success in its enforcement actions, but it
won a Supreme Court ruling in 2013 that provided a significant
boost to its efforts. The Cephalon case was being watched closely
as an early test for how lower courts would apply the Supreme
Court's decision.
"I believe this settlement brings us another step closer to
stopping these illegal arrangements," FTC Chairwoman Edith Ramirez
said at a news conference. Such deals burden patients, businesses
and taxpayers with billions of dollars in higher prescription drug
costs, she said.
Teva spokeswoman Denise Bradley said, "We are pleased to have
reached an agreement with the government." Teva believes the
settlement "is the right path for our company, for the industry and
for the patients we serve," she said.
Cephalon didn't admit liability or wrongdoing as part of the
settlement.
The FTC's lawsuit has been a long road, dating back to 2008 when
Cephalon was an independent company. Teva bought the drug maker in
2011.
The FTC alleged Cephalon collectively compensated several
generic-drug makers, including Teva, about $300 million in exchange
for abandoning challenges to the patent for Provigil and to refrain
from selling generic versions of the drug until 2012. The
agreements caused consumers and others to pay hundreds of millions
of dollars more for the drug than they would have paid annually if
inexpensive generic alternatives were available, the commission
alleged.
Antitrust litigation rarely goes to trial, as defendant
companies can face high monetary damages if they lose. The judge
overseeing the Cephalon case ruled in April that the FTC could seek
disgorgement of Cephalon's allegedly ill-gotten profits, a dollar
figure much larger than what Teva will pay in the settlement.
Write to Brent Kendall at brent.kendall@wsj.com
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