What happened
Shares of Pharmaceutical Teva (NYSE: TEVA) fell about 15% today after the U.S. government filed a lawsuit against the drugmaker, accusing it of cheating Medicare with the help of kickbacks to increase Copaxone sales.
According to Reuters, the lawsuit alleges that the drugmaker illegally made $ 300 million in donations to two charitable foundations from 2006 to 2015 to cover the rising cost of the drug for multiple sclerosis. The kickbacks reduced the cost of co-payments, which are intended to put downward pressure on drug prices. The U.S. government claims that the practice resulted in taxpayers’ bills for raising drug prices.
As of 3:02 a.m. EDT had adjusted the pharma stock to a loss of 10.9%.
Image Source: Getty Images.
So what
How many red flags can investors fly? This is just the latest lawsuit against Teva, which has also recently faced legal risks related to its involvement in the US opioid crisis and an industry-wide price-fixing scandal related to generic drugs.
In March, the company stopped negotiating with the U.S. government related to the pricing scheme. Teva essentially states that it has no criminal consequences during the coronavirus pandemic, when access to generic medicines is critical. The U.S. government moved to go with its case in July – and Teva Pharmaceutical decided to focus on the first trial.
Well what
Investors may try to look at the low share price of Teva Pharmaceutical and conclude that it is a value stock in an otherwise valued market. But investors should also ask themselves if they want to have a business with what appears to be a moral bankruptcy culture.
