Drugmaker’s settlement with FTC is a record

Teva to pay $1.2 billion in case involving generic medicine

The Federal Trade Commission announced Thursday a record settlement of $1.2 billion with Teva Pharmaceutical Industries over charges that its subsidiary Cephalon illegally blocked generic competition to its sleepdisorder drug Provigil.

Cephalon, which agreed in 2011 to be bought by Israel-based Teva, had been in litigation with the commission since 2008. The case was due to go to federal court in Philadelphia on Monday. The five FTC commissioners were unanimous in a 5-0 vote to resolve the lawsuit. Teva is the world’s largest generic drug manufacturer.

The case is the latest and most significant signal yet, experts say, that the federal government, and the FTC in particular, is focused on increasing competition in the pharmaceutical industry, with the aim of reducing health care costs.

At issue in the settlement, the highest the agency has ever reached, is the industry practice known as reverse payment settlements. Cephalon paid generic manufacturers more than $300 million to agree not to begin selling their copycat versions until 2012, according to the FTC. Were it not for the deals with generic companies, the drug would have faced competition in 2006.

In the year before a generic version of Provigil, which is approved to treat excessive sleepiness, was available on the market, domestic sales of the drug exceeded $1 billion, according to the commission.

The $1.2 billion settlement will go toward paying purchasers of Provigil — including wholesalers, pharmacies and insurers — who the FTC said overpaid because of Cephalon’s conduct. In April, Teva reached a $512 million settlement over the same issue with drug purchasers and others who buy products directly from the manufacturers; that amount is included in the $1.2 billion settlement announced Thursday, the FTC said.

“The FTC has been very committed to putting a stop to these kinds of deals,” Edith Ramirez, the commission’s chairwoman, said Thursday at a news conference. “There’s no question that pharmaceutical companies have gotten very creative in the way they try to get around the antitrust laws. We’re going to continue our fight.”

Asked by what date Teva would be required to pay the settlement, Ramirez said the agreement still needed to be approved by the court.