Teva pays $1.2bn to settle pay-for-delay deal

Teva has agreed to pay a whopping $1.2 billion to settle a US lawsuit claiming its subsidiary Cephalon paid to hold up generic competition to its narcolepsy therapy Provigil.

In a statement, the Federal Trade Commission (FTC) said the settlement – the largest ever secured by the agency – will be used to 'compensate purchasers, including drug wholesalers, pharmacies, and insurers, who overpaid because of Cephalon's illegal conduct'.

Teva inherited the seven-year-long dispute after buying Cephalon in a $6.8 billion deal in 2011, trumping a hostile bid for the company from Valeant.

The suit alleged that Cephalon unlawfully protected Provigil (modafinil) by agreeing a series of deals, valued at around $300 million, with four generic drugmakers in 2005 and 2006, when the drug was pulling in $1 billion in sales. According to the FTC, Cephalon paid the companies to drop patent challenges and delay the launch of Provigil generics until April 2012.

Earlier the FTC had been pushing for as much as $4 billion in penalties for the conduct if it was found that Cephalon had violated antitrust laws and, with a court date looming in June, Teva clearly decided to err on the side of caution.

The FTC also said Teva could count its settlement with private plaintiffs in related litigation towards that total disgorgement figure. In April Cephalon agreed to pay direct purchasers $512 million to settle a class action lawsuit.

Under the terms of the agreement, Teva has signed a consent decree, agreeing to a complete block on any similar pay-for-delay deals in future.

The settlement "is an important step in the FTC's ongoing effort to protect consumers from anti-competitive pay for delay settlements, which burden patients, American businesses, and taxpayers with billions of dollars in higher prescription drug costs," said FTC chair Edith Ramirez.

Teva stressed that the agreements related to actions taken before it purchased Cephalon, but added it was 'pleased to have reached an agreement with the government'.

'In relation to the consent decree, Teva believes it is the right path for our company, for the industry and for the patients we serve,' it added.

The case is the latest in a series of settlements and judgments on pay-for-delay deals on both sides of the Atlantic, with activity in the US stepping up following a 2013 Supreme Court ruling that the agreements sometimes violate antitrust law.

Other cases in the US include the FTC's pursuit of AbbVie subsidiary Solvay and Actavis unit Watson on testosterone replacement therapy product Androgel, while in the EU Servier, Johnson & Johnson, Novartis and Lundbeck have all been fined in pay-for-delay rulings.