The office of New York Attorney General Eric Schneiderman has reached a settlement with Ranbaxy Pharmaceuticals and Teva Pharmaceutical (NYSE:TEVA) that will require the two generic-pharmaceutical companies to terminate an agreement they reached in 2010, the AG announced in a press release today. The settlement addresses concerns that the agreement unlawfully restricted competition.
The agreement was initially made between Teva and Ranbaxy surrounding the production of a generic version of Lipitor, however the Attorney General's Office says the agreement "contained an unusual provision" in which the two companies agreed they would not compete against each other in certain drug categories.
The Attorney General's Office began its investigation in 2012, and concluded that the agreement was unlawful as it restricted competition, and sought to protect the two companies' market positions for a variety of different drugs and reduce the risk posed to the firms.
Ranbaxy and Teva neither admitted nor denied the AG's findings, according to the settlement.
As a result of the settlement reach today, the two companies will have to end their prior agreement and also ensure they do not enter into any similar agreements in the future. In addition, both Teva and Ranbaxy have been required to pay the state of New York $150,000.
"Agreements between drug manufacturers to protect each other's market positions violate fundamental principles of antitrust law and can lead to higher drug prices," concluded Attorney General Schneiderman in a statement. "Drug companies should be aware that my office will intervene aggressively to root out collusion among industry players and ensure that New Yorkers receive access to critical drugs at fair value."
Patrick Morris has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.