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U.S. Government Sues Teva Pharmaceutical for Alleged Drug Kickbacks

By Eric Volkman – Aug 18, 2020 at 11:03PM

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Two of the company's business units stand accused of improperly assisting Medicare recipients through proxies.

Shares of Teva Pharmaceutical Industries (TEVA -0.46%) took a nearly 10% hit on Tuesday following news that the U.S. government is suing two of the company's business units.

In its official statement on the lawsuit, the Department of Justice alleges that Teva Pharmaceutical and Teva Neuroscience "illegally paid the Medicare copays for their multiple sclerosis product, Copaxone, through purportedly independent foundations that the companies used as conduits."

Stethoscope atop U.S. currency and an insurance claim form.

Image source: Getty Images.

This would violate a federal anti-kickback statute that explicitly bars nonprofits that assist with drug copayments from helping Medicare and Medicaid recipients in this way. The law is intended to keep patients receiving such assistance from being steered toward newer, higher-priced drugs.

The DOJ is accusing the company's subsidiaries of channeling $300 million through two charitable foundations and a specialty pharmacy to help with sales of Copaxone. The DOJ does not name these entities in its statement. 

Bloomberg quoted an email from Teva spokeswoman Kelley Dougherty as stating that the government's legal action "only seeks to further restrict patients' access to important medicines and healthcare." She said her company will defend itself in the lawsuit.

This is not the first time in recent months that Teva has found itself in hot legal water. In January, it agreed to pay a $54 million settlement over allegations that it effectively bribed doctors to prescribe Copaxone and Parkinson's disease treatment Azilect. This was supposedly done by paying those individuals speaker fees for events that only Teva officials attended.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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