Teva Pharmaceutical (NYSE: TEVA) has been indicted on charges of conspiracy to fix the prices of generic drugs. At least one analyst estimated $1 billion in liability for the company as a result of the indictment.
The DOJ's charges allege that Teva was a participant in several conspiracies to fix generic drug prices and allocate customers for them. Teva was apparently doing so with other companies and is the seventh company charged in the ongoing investigation. Despite the indictments, there have been no trials as of yet, with most cases resolved through deferred prosecution agreements.
According to court filings in a Pennsylvania district court, the conspiracies took place around 2013 and continued into late 2015. According to the filings, Teva conspired with Glenmark Pharmaceuticals and Apotex to increase prices for cholesterol medicine, conspired with Taro Pharmaceuticals (NYSE: TARO) to raise prices and allocate customers for generic drugs for several conditions including arthritis and blood clots. Teva also conspired with Novartis (NYSE: NVS) to fix prices for generic brain cancer and cystic fibrosis drugs, among others.
In the cases involving Apotex, Taro, and Novartis, all companies were forced to pay settlements. Apotex paid $24 million, Taro $206 million, and Novartis $195 million. Glenmark's case is still awaiting trial.
According to one analyst, Teva is at risk for a considerable legal cost for the court battle ahead. Establishing price-fixing in court is an uphill battle for the DOJ, but the risk is still genuine for Teva. The price will come from the legal costs of battling the DOJ in court.
"Based on prior settlements we assume $1 billion in contingent liability for TEVA for generic price fixing matters," said the analyst.
A projected $1 billion in legal spending is bad news for Teva, considering the company is already tied up in litigation from the company's role in the opioid epidemic. To make matters worse, Teva isn't in excellent financial health either, with the growth of its drug sales slowing down considerably over the last quarter.
Teva's stock has fluctuated rapidly since the Tuesday announcement of the indictment. Teva opened at $9.67 on Tuesday and ended trading on Wednesday down .8% at $9.59. At the time of writing, Teva's share price was down to $9.46, ten minutes past 2 pm.