Shares of Teva Pharmaceutical (TEVA) crashed to an 18-month low Monday after 44 states filed a lawsuit alleging pharmaceutical companies fixed the prices of generic drugs.
Filed Friday, the lawsuit accuses 20 pharmaceutical companies — including Teva, Novartis (NVS), Mylan (MYL) and Pfizer (PFE) — of colluding to keep the prices of more than 100 generic drugs artificially high. It also names 15 executives at the heart of the alleged conspiracy.
Connecticut Attorney General William Tong called the alleged scheme a “multibillion-dollar fraud on the American people.”
“We have emails, text messages, telephone record and former company insiders that we believe will prove a multiyear conspiracy to fix prices and divide market share for huge numbers of generic drugs,” Tong said in a written statement.
Generic Drug Stocks Topple
On the stock market today, Teva stock plummeted 14.8%, to 12.23, in heavy volume. Mylan stock plunged 9.4%, to 20.08. Perrigo (PRGO), another competitor in generic drugs, slid 4.3%, to 49.77. Collectively, shares of generic drug makers fell around 2%.
The complaint lays out “an interconnected web” of executives from pharmaceutical companies who would meet during industry dinners, girls’ night out, lunches, cocktail parties and golf outings to discuss the prices of generic drugs and how to divvy up the market.
A news release from Connecticut’s Tong calls the case “possibly the largest cartel case in the history of the United States.” It follows a similar lawsuit filed in 2016 against six pharmaceutical companies. Then, a small coalition of states focused on the prices of an antibiotic and a diabetes medicine.
Since then, the 2016 case has broadened to include 18 pharmaceutical companies, two individuals and 15 generic drugs. In 2017, two former Heritage Pharmaceuticals executives pleaded guilty in that case. But it’s otherwise still being litigated.
Companies Deny Wrongdoing
Pfizer denied wrongdoing in an email to Investor’s Business Daily. Teva said it would continue to defend itself.
“The allegations in this new complaint, and in the litigation more generally, are just that – allegations,” Teva said in an emailed statement. “Teva continues to review the issue internally and has not engaged in any conduct that would lead to civil or criminal liability.
Representatives of Mylan and Novartis didn’t immediately return requests for comment.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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