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Teva Pays $420 Million to End Generic-Drug Securities Suit (1)

Jan. 19, 2022, 3:27 PMUpdated: Jan. 19, 2022, 6:02 PM

Teva Pharmaceutical Industries Ltd. will pay $420 million to resolve securities fraud litigation over its alleged role in an industrywide conspiracy to inflate the price of generic drugs across the board, according to a federal court filing in New Haven, Conn.

The pension funds leading the case sought preliminary approval for the agreement late Tuesday from Judge Stefan R. Underhill, who’s overseeing the class action on behalf of shareholders in the U.S. District Court for the District of Connecticut.

The pact is the second-largest securities settlement in the district’s history, “larger than all but one” nationwide last year, and among the 10 biggest since the enactment in 1995 of the Private Securities Litigation Reform Act, excluding litigation involving the 2008 financial crisis, according to the filing.

“The cash recovery of $420 million is a particularly compelling result given the risks and delay of continued litigation” and other “imminent exposures facing Teva,” according to the motion for preliminary settlement approval.

“By providing a prompt, certain, and substantial cash recovery for the settlement class—as opposed to prolonged litigation that could yield no recovery or, at best, a far-off judgment that Teva could be unable to satisfy—the proposed settlement now confers significant benefits,” the filing says.

The deal would resolve claims that Teva and its executives misled investors by attributing the company’s earnings to strong “fundamentals” and organic growth in a competitive market, when they knew its performance was based on illegal practices like price-fixing that can’t sustain long-term success.

A Teva spokesperson told Bloomberg Law in a statement Wednesday that the deal “is in the overall best interest of Teva and the patients who continue to rely on us each day for the world’s largest portfolio of generic medicines.” The company is not admitting any liability, according to the spokesperson.

“We continue to settle complex legacy legal cases so that we may focus on our mission of providing access to affordable lifesaving medicines throughout the world,” the statement said. “Teva’s insurance carriers will fund the vast majority of the settlement amount, with a minimal contribution from Teva.”

Like similar suits targeting other pharmaceutical companies and drug distributors, the case stems from the massive price-fixing controversy that has engulfed the generic drug industry.

A Justice Department investigation into generic pricing has led to federal criminal charges and a sprawling multidistrict case that includes several proposed class actions and antitrust claims by pharmacies, pension funds, insurers, distributors, hospitals, and nearly every state attorney general.

That case is headed for bellwether trials in the U.S. District Court for the Eastern District of Pennsylvania.

Bleichmar Fonti & Auld LLP is co-lead counsel for the investors, who are also represented by liaison counsel Carmody Torrance Sandak & Hennessey LLP. Teva and its executives are represented by Kasowitz Benson Torres LLP; Morgan, Lewis & Bockius LLP; and Shipman & Goodwin LLP.

The case is In re Teva Sec. Litig., D. Conn., No. 17-cv-558, motion for preliminary settlement approval filed 1/18/22.

(Updates with comments from Teva in paragraphs seven and eight.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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