As reflected in their January 18, 2022 stipulation of settlement, the parties to the consolidated Teva Pharmaceutical Industries securities class action litigation have reached an agreement to settle the case for a payment of $420 million. The settled claims relate to underlying allegations concerning price-fixing in connection with the company’s generic drug products. According to the statements of a company spokesperson, the “vast majority” of the settlement amount will be funded by the company’s D&O insurers. The settlement is subject to court approval. A copy of the parties’ January 18, 2022 stipulation of settlement can be found here.



As I noted in a post at the time (here), Teva was one of several generic drug companies hit with a securities class action lawsuit in late 2016 following news that Teva and other companies in the industry were under investigation from the U.S. Department of Justice and state authorities relating to allegations concerning generic drug price-fixing.


As detailed here, following the news concerning the price-fixing investigation, several claimants instituted separate securities class action proceedings against the company. The various actions ultimately were consolidated in the United States District of Connecticut. As detailed in the plaintiffs’ Second Amended Consolidated Class Action Complaint (here), the plaintiffs allege that the defendants misled investors with respect to the company’s significant revenue and profit increases during the class period (February 6, 2014 to May 10, 2019), and, specifically, that the company’s ability to raise prices for its generic drug products allegedly was the result of price-fixing involving competitors. The court denied in substantial part the defendants’ second motion to dismiss in the securities class action on September 25, 2019.


Following the court’s ruling on the renewed motion to dismiss, the parties commenced discovery. Separately, the parties also initiated mediation efforts. Although initially unsuccessful, the parties’ mediation efforts ultimately resulted in the parties’ agreement to settle the litigation.


The settlement specifies that the parties have agreed to settle the case in exchange for a cash payment by or on behalf of the defendants of $420 million. The defendants deny any wrongdoing. The settlement is subject to court approval. A January 18, 2022 Reuters article about the settlement (here) quotes a Teva spokesperson as saying that the “vast majority” of the settlement will be funded by the company’s insurers.


Interestingly, a number of individual opt-out actions have already been filed in connection with the claims against the Teva defendants. As far as I can tell, the settlement reflected in the settlement stipulation appears to resolve the opt-out actions as well as the consolidated class actions. (Any insight any reader can provide on this point would be appreciated.)



As massive as this settlement is in U.S. dollar terms, this settlement does not even crack the top 40 of all-time largest U.S. securities class action lawsuit settlements. According to the ISS Securities Class Action Services list of Top 100 U.S. settlements as of 12/31/2020 (that is, meaning that the list does not yet incorporate 2021 settlements that should be added to the list), this settlement would come in as the 41st largest U.S. securities class action settlement. The fact that a settlement as massive as this one comes in so far down the list says something about the magnitude and serious of securities class action claims in the U.S. in recent years.


For me, the interesting thing about this settlement is not just its size, it is that it relates to underlying allegations of price-fixing. As I have noted in several recent posts on this site (refer, for example, here, sixth item), the Biden administration’s antitrust enforcement appointments reflect a predisposition towards an active and aggressive antitrust enforcement approach. We are only just a year into the Biden administration; however, based on the appointments, it appears that we can anticipate an activist antitrust enforcement agenda.


As this securities litigation filed against Teva and against the other generic drug manufacturers demonstrate, antitrust enforcement activity can lead in turn to follow-on securities litigation and other D&O claims. (As discussed here, a separate antitrust investigation in 2016 into pricing-fixing in the poultry industry also led to a series of class action lawsuits.) As the recent massive Teva settlement shows, this litigation can be serious; the fact that most of this settlement was funded by D&O insurance also highlights the fact that this kind of litigation can be very serious for the D&O insurers as well.


One final note. Teva is an Israeli company with American Depositary Shares listed on the U.S. exchanges. The fact that Teva’s insurers have contributed to what is by any measure a massive settlement seemingly would have significant implications for the community of insurers involved in insuring companies with U.S. ADR listings. I also suspect (without having any direct basis for knowing) that this settlement has significant implications for the domestic Israeli insurance marketplace as well. I welcome any insights that any reader may be able to provide (without attribution of course) about the impact of this settlement on the community of insurers providing insurance for companies with ADR listings, and in particular the impact on the Israeli insurance community.  I also welcome any intel anyone can provide on exactly how much of the $420 million settlement is being funded by D&O insurance.