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B.A. in economics and MBA from top 10 business school. I have over 10 years of M&A / corporate finance experience. Currently head the New York Shock Exchange, a youth mentorship program that teaches investment management skills and ... more

Did Teva Offer 'Illegal' Payments For Opioid Sales?

Date: Sunday, October 29, 2017 11:11 PM EST

According to sources the government of Ontario is investigating whether Teva (TEVA) made "illegal" payments to stock its opioid medications:

The Ontario government is investigating allegations that a drug company offered pharmacies “illegal” payments to stock its opioid medications fentanyl and oxycodone.

Reacting to the findings of a Star investigation, Health Minister Eric Hoskins said he has ordered a probe into drug giant Teva.

The Star has obtained emails showing a Teva corporate accounts manager offering to pay an Ontario-based pharmacy group a rate of 15 per cent of the drug price if it stocked the company’s prescription opioids.

Opioids continue to dominate the news cycle. U.S. lawmakers are marshaling all resources to tamp down their usage. Will Teva get caught in lawmakers' dragnet?"

The Situation

Payments from a drug company to induce a pharmacy to stock that company's drugs are known as rebates in the drug industry. They can also take the form of financial payments or other inducements. Over a decade ago Canada's prices for generic drugs were considered some of the highest in the world. In 2006 the country passed Bill 102, the Transparent Drug System for Patients Act, to expose and correct some of the drug industry's hidden practices that might have contributed to high prices:

For complicated reasons, Canadian prices for generic drugs — copies of brand-name drugs which have lost patent protection — are among the highest in the world. (See Patented Medicine Prices Review Board, Non-Patented Prescription Drug Prices Reporting, 2006.) ... 

The province banned rebates that generic manufacturers were paying to pharmacies to induce them to stock their company’s version of a generic drug —rebates estimated to average 40% off the invoice price. In essence, pharmacies obtained the drugs at low wholesale prices but invoiced the government at the often significantly higher prices listed in the provincial drug formulary.

At the same time, Ontario slashed the amount it will pay pharmacies for the generic forms of drugs from an average of 63% of the list price for the brand-name version to 50%.

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