It's not the first time Teva Pharmaceutical Industries has faced scrutiny by U.S. prosecutors. The Israel-based drugmaker ($TEVA) went under investigation for potential bribery overseas in 2012. Now, the Department of Justice has turned to Teva's marketing, eyeing two branded medications, its top-selling multiple sclerosis drug Copaxone and its Parkinson's disease treatment Azilect.
The U.S. Attorney for the Southern District of New York has demanded documents and information related to Teva's sales and marketing practices since 2006, the company disclosed in its annual filing with the Securities and Exchange Commission. "The [civil investigative demand] states that the government is investigating possible civil violations of the federal False Claims Act," Teva said in the filing. "Teva is in the process of complying with the subpoena."
A host of drugmakers have received similar subpoenas over the past several years and later faced allegations of marketing drugs for unapproved uses and using kickbacks to induce physicians to prescribe more of their medications. More than a dozen companies have settled marketing allegations, several for upward of $1 billion.
GlaxoSmithKline ($GSK) agreed to pay the largest single settlement--$3 billion--to wrap up a DoJ probe, covering its marketing of a list of drugs, including the diabetes treatment Avandia and the antidepressants Paxil and Wellbutrin. Pfizer's ($PFE) total settlement of $2.3 billion, which covered several drugs including its painkiller Bextra, wasn't the largest in total, but its criminal penalty of $1.3 billion did set a record. Eli Lilly ($LLY), AstraZeneca ($AZN) and Johnson & Johnson ($JNJ) are among the others with marketing settlements to their names.
Of course, not every DoJ subpoena ends in a settlement, much less a $1 billion payment. "It's hard to know at this point just how significant the case is," Bank of Jerusalem analyst Jonathan Kreizman told Bloomberg. "But typically these type of cases, if they lead to financial settlements, are seen by investors as one-time events and so shouldn't be a huge hit for the stock."
Whatever the Teva probe signals to investors, it is another sign that prosecutors haven't flagged in their pursuit of marketing violations. After wrapping up a series of settlements, Justice Department officials remain on the beat--indeed, prosecutors have threatened to go after individual company executives and managers, hoping that personal prosecution might further deter bad behavior. Except in a few cases, that hasn't yet happened.
What has happened is a continuing flow of new whistleblower lawsuits and federal probes. Last month, officials announced a move against Novartis ($NVS), alleging that the Swiss drugmaker paid kickbacks to induce specialty pharmacies to refer more patients to use its iron chelation treatment Exjade. And Monday, the original whistleblower lawsuit in that case was amended; the whistleblower plans to go ahead with several claims against Novartis that the feds have so far declined to back.
- read the Bloomberg story
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