Halman Aldubi Provident & Pension Funds Ltd. v. Teva Pharm. Indus.

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HALMAN ALDUBI PROVIDENT AND PENSION FUNDS LTD., Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. TEVA PHARMACEUTICALS INDUSTRIES LIMITED, et al., Defendants.

Civil Action No. 20-4660-KSM

United States District Court, E.D. Pennsylvania

August 2, 2022

MEMORANDUM

MARSTON, J.

Lead Plaintiff Gerald Forsythe, individually and on behalf of all others similarly situated, alleges that Teva Pharmaceuticals Industries Limited (“Teva”) and Teva executives Erez Vigodman, Eyal Desheh, Robert Koremans, Michael Derkacz Kare Schultz, Michael McClellan, and Brendan O'Grady (collectively, the “Individual Defendants,” and together with Teva, “Defendants”) violated Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 by making false and misleading statements and by failing to disclose material information about Teva's drug Copaxone. (Doc. No. 64-2.) Plaintiff also claims the Individual Defendants violated Section 20(a) of the Exchange Act because they knew or recklessly disregarded that Teva was making materially false and misleading statements and material omissions. (Id. ¶¶ 249-54.)

On March 25, 2022, the Court granted in part and denied in part Defendants' motion to dismiss. (Doc. No. 74.) The case is now ripe for discovery; however, Defendants seek to stay the case, except as to class certification, pending the resolution of a related enforcement action brought against Teva by the U.S. Department of Justice (the “DOJ Action”). (Doc. No. 83.) Plaintiff opposes the motion. (Doc. No. 85.) For the reasons below, the motion is granted.

I. BACKGROUND

A. Factual Background

Taking the allegations in the Corrected Amended Complaint as true, the relevant facts are as follows.

1. Teva's Business

Teva is a global pharmaceutical company that sells generics, specialty medicines, and over-the-counter products. (Doc. No. 64-2 ¶ 27.) One of Teva's products is Copaxone (glatiramer acetate injection), an injectable drug used to treat patients with multiple sclerosis. (Id. ¶ 28.) Copaxone is “one of the leading” therapies for multiple sclerosis in the United States, and in the mid-2010s, it was responsible for nearly half of the revenue in Teva's specialty medicines portfolio. (Id. ¶ 30.)

2. Shared Solutions Program

Teva sponsors “Shared Solutions,” a program designed to increase patient access to Copaxone. (Id. ¶ 41.) Through the program, Teva trains patients on how to inject the drug, offers patients injection devices to administer the drug, and assigns patients case managers who help patients secure insurance coverage for the drug. (Id.) In 2006, in connection with the Shared Solutions program, Teva contracted with Advanced Care Scripts, Inc. (“ACS”), a specialty pharmacy. (Id. ¶ 42.) Teva sent ACS prescriptions for patients participating in Shared Solutions who “either had or were eligible for Medicare Part D coverage.” (Id.) For the patients who did not already have Medicare Part D coverage, ACS assisted with the enrollment process. (Id.) And for the patients who already had Medicare Part D coverage and were eligible for co- pay coverage from a patient assistance program (“PAP”),^[1] ACS helped them apply for PAP assistance. (Id.) Teva also provided free Copaxone to low- or no-income patients; however, if those patients were eligible for Medicare Part D, Teva sent those patients to ACS for assistance enrolling in Medicare Part D and applying for PAP assistance. (Doc. No. 57 ¶ 43.)

ACS referred Teva's Copaxone patients to two PAPs for co-pay assistance: the Chronic Disease Fund (“CDF”) and The Assistance Fund (“TAF”). (Id. ¶ 42.) Both CDF and TAF maintained funds dedicated to assisting multiple sclerosis patients, through which they “provided co-pay assistance to patients for, ostensibly, any of the [multiple sclerosis] drugs on the market.” (Id.) Teva regularly donated to both PAPs. (Id.) Under the applicable regulations, pharmaceutical companies may donate to PAPs; however, “the funds received through donations must be applied generally to all beneficiaries, and it is illegal for a Charitable PAP to apply the funds received to any particular drug.” (Id. ¶ 35.)

Teva allegedly ran afoul of those regulations. (Id. ¶ 48.) Teva did not intend its donations to CDF and TAF to cover co-payments for multiple sclerosis treatments generally; rather, it intended its donations to CDF and TAF to cover patients' co-pays on Copaxone specifically. (Id.) In fact, Teva executives regularly described the company's donations to CDF and TAF as “Copaxone donations.” (Id.) Teva's intentions bore out. (Id. ¶ 46.) For instance, in December 2009 and January 2010, Teva donated $15.7 million to TAF, “approximately 99% of which was paid to Copaxone patients.” (Id.) In all, Teva donated tens of millions of dollars to CDF and TAF annually to fund Copaxone co-pays. (See id. ¶ 53 (indicating that Teva made the following donations to CDF and TAF: $36,934,678 in 2012, $36,932,589 in 2013, and $34,774,070 in 2014).)

Copaxone patients receiving Medicare co-pay assistance from CDF and TAF made up roughly 27% of patients on Copaxone. (Id. ¶ 62.) Teva recognized that if it stopped funding these co-pay assistance programs, the patients “may not fill Rx and go off therapy, which would result in a negative impact to the brand of $210-280M.” (Id.) While Teva was donating to CDF and TAF, it “raised the price of Copaxone at a rate . . . over 19 times the rate of inflation, from approximately $17,000 per year to $73,000 per year.” (Id. ¶ 69.)

3. The DOJ Subpoena

On March 21, 2017, the United States Attorney's Office for the District of Massachusetts subpoenaed Teva for information about the company's donations to charitable organizations, including PAPs. (Id. ¶ 118.) Teva disclosed the subpoena in the next Form 6-K it filed on May 11, 2017. (Doc. No. 67 at 39 (Teva's May 11, 2017 6-K disclosing, “On March 21, 2017, Teva received a subpoena from the U.S. Attorney's office in Boston, Massachusetts requesting documents related to Teva's donations to patient assistance programs. Teva is in the process of responding to the subpoena.”).) Despite receiving this subpoena, Teva continued operating the Shared Solutions program and making donations to CDF and TAF through at least 2018. (Doc. No. 64-2 ¶ 120.)

4. Defendants' Relevant, Post-Subpoena Statements

Both before and after receiving the subpoena, Teva made various statements regarding Copaxone and the Shared Solutions program. But Teva never disclosed its scheme to make “Copaxone donations” to PAPs. (See, e.g., id. ¶ 71.) Plaintiff also contends that Teva and its executives' omissions caused the company's disclosures regarding its compliance with federal law to be false and misleading. (See, e.g., id. ¶ 114.)

5. The DOJ Action

On August 18, 2020, the U.S. Attorney's Office for the District of Massachusetts filed a complaint against Teva for alleged violations of the False Claims Act. (Id. ¶ 169.) Specifically, the Government alleges that Teva's payments to CDF and TAF were “kickbacks” that allowed the Company to increase the price of Copaxone while leaving “American taxpayers to shoulder the high prices that Teva set.” (Id.) In September 2021, the Honorable Nathaniel M. Gorton denied Teva's motion to dismiss. See United States v. Teva Pharms. USA, Inc., 560 F.Supp.3d 412 (D. Mass. 2021). Discovery is underway, dispositive motions will be fully briefed on May 21, 2023, and the case is set for trial on September 18, 2023. (See United States v. Teva Pharms. USA, Inc., Civil Action No. 1:20-cv-11548-NMG (D. Mass.), Doc. No. 45.)

B. Procedural History

On September 23, 2020, Halman Aldubi Provident and Pension Funds Ltd. (“Halman Aldubi”) commenced this lawsuit individually and on behalf of all others similarly situated. It alleged that Teva committed securities fraud by making false and misleading statements regarding Copaxone and the Shared Solutions program.^[2] (Doc. No. 1.) On March 26, 2021, the Court named The Investor Group, consisting only of Gerald Forsythe, as lead plaintiff and appointed Faruqi & Faruqi, LLP as lead counsel. See Halman Aldubi Provident & Pension Funds Ltd. v. Teva Pharm. Indus. Ltd., 529 F.Supp.3d 385, 411 (E.D. Pa. 2021).

On May 25, 2021, Plaintiff filed an Amended Complaint. (Doc. No. 57.) The parties “met and conferred regarding the substance of Defendants' planned motion to dismiss,” and Defendants notified Plaintiff of a technical inaccuracy in the Amended Complaint. (Doc. No. 64 at 2.) On August 10, 2021, Plaintiff moved to strike the Amended Complaint and file a corrected amended complaint to correct the inaccuracy, which Defendants did not oppose. (Id.) The Court granted the motion (Doc. No. 65), and Plaintiff's Corrected Amended Complaint (Doc. No. 64-2) became the operative complaint.

In August 2021, Defendants filed a motion to dismiss (Doc. No. 66), which the Court granted in part and denied in part in March 2022 (Doc. No. 74). On May 23, Defendants filed an answer (Doc. No. 80), and the Court scheduled a telephonic pretrial conference to be held on June 14, 2022 (Doc. No. 81). In advance of the conference, the parties submitted a Joint Report Pursuant to Rule 26(f), wherein Defendants indicated their intention “to move to stay merits discovery while proceeding with class certification discovery and briefing.”^[3] (Doc. No. 83-2, Ex. B at 7). At the conference, Defendants offered argument why they sought to stay the case (except as related to class certification), Plaintiff offered argument why a stay was inappropriate, and the Court set an expedited briefing schedule for the motion.

On June 28, Defendants filed a motion to stay all proceedings, except those related to class certification, pending resolution of...