Pomerantz Resolves Opt-Out Actions with Teva Pharmaceuticals

Pomerantz recently resolved a shareholder litigation against Teva Pharmaceuticals Ltd., in which Pomerantz represented 22 Israeli institutional investors who had opted out of a previous securities class action. The case concerned an alleged price-fixing scheme as well as Teva’s role in the devastating U.S. opioid crisis.

Headquartered in Tel Aviv, Teva is one of the world’s largest manufacturers of generic drugs. Between July 2013 and April 2016 Teva raised the prices of its generic drugs 76 times. The suit alleges that Teva enacted these price increases in collusion with its competitors in the generic drug market, forming part of what Connecticut assistant attorney general Joseph Nielsen would later call “most likely the largest cartel in the history of the United States.” This alleged price fixing scheme led to massive profits for Teva, driving the company’s share price to an all-time high of $72 per share in 2015. In the years that followed, the generic drug industry came under increasing scrutiny, culminating in May 2019 with the attorneys general of 47 states filing an antitrust complaint detailing Teva’s collusive activity. Pomerantz’s suit alleges that throughout the class period Teva attributed its soaring profits to good business practice, concealing from investors the price-fixing scheme that was the true driver of the company’s financial success.

Pomerantz’s suit also made novel claims, unaddressed by either the class action or the other opt outs, relating to Teva’s role in the opioid crisis that has swept across the United States. Among Teva’s products are the drugs Actiq and Fentora, opioids used for the treatment of breakthrough cancer pain. According to the complaint filed by Pomerantz, Teva was aware that opioids are highly addictive and prone to abuse when prescribed for chronic pain not caused by cancer and should be used only as a treatment of last resort. The suit alleges that, in spite of this knowledge, Teva engaged in a coordinated, and illegal, campaign to change the opinion of the medical community and the public at large in order to expand the use of opioids to treat common forms of pain like arthritis, lower back pain, and headaches. Teva’s efforts included disseminating materials that misrepresented the risks and benefits of opioid use, recruiting physicians as paid speakers in order to secure “brand loyalty,” and directing doctors to present scripted talks supporting opioid therapy, among other actions. According to the complaint, Teva’s campaign was part of the “aggressive marketing” that the National Institutes of Health identified as one of the key drivers of the opioid epidemic, leading to soaring profits for Teva while laying waste to communities across the United States. Over the course of the class period, the truth about Teva’s actions eventually came to light. Approximately 3,500 lawsuits were filed against Teva and its affiliates, however the company assured investors that it had never engaged in improper marketing. In May 2019, Teva agreed to an $85 million settlement with the State of Oklahoma and the market began to reconsider the extent of Teva’s potential liability in opioid-related litigation. In response to these revelations, Teva’s share price plummeted to $8.84 on May 30, 2019, marking a 19-year low. These opioid claims were sustained by the court when Pomerantz overcame the defendants’ motion to dismiss.

In the course of the litigation, Pomerantz achieved an important ruling for investors when it convinced the court to exercise supplemental jurisdiction over Israeli law claims. Pomerantz’s clients had purchased both Teva’s American Depositary Shares, which are listed on the New York Stock Exchange, and Teva’s common stock listed on the Tel Aviv Stock Exchange. The U.S. Supreme Court’s ruling in Morrison v. National Australia Bank Ltd (2010), which barred foreign plaintiffs from suing foreign issuers under U.S. federal securities laws to recover losses from transactions on foreign exchanges, would seem to prevent Pomerantz’s clients from pursuing recovery for losses related to their common stock purchases. In his ruling on the defendants’ motion to dismiss the Israeli law claims, U.S. District Judge Stefan Underhill conducted the first in-depth analysis of these kind of claims under Israeli law, considering numerous factors and recent caselaw. In a major victory for investors, Judge Underhill denied the motion to dismiss the Israeli law claims and exercised supplemental jurisdiction over the Israeli securities law claims, stating that Pomerantz’s clients’ “federal securities law and Israeli securities law claims seem to me, in every important respect, identical.” This ruling has the potential to provide a road map for future claims concerning dual-listed shares, opening an important avenue for global investors to pursue recovery for losses incurred through securities fraud.