Teva Pharmaceutical (TEVA) dropped almost 9%, McKesson (MCK) shed more than 5% and AmerisourceBergen (ABC) fell 3.8% in afternoon trading in the wake of a Wall Street Journal report that federal prosecutors are looking into whether the companies violated the federal Controlled Substances Act, a law commonly used against drug dealers.
The paper cited sources familiar with the matter. Other companies named in the report were Mallinckrodt (MNK), Johnson & Johnson (JNJ) and Amneal Pharmaceuticals (AMRX). Those companies have said in regulatory filings that they received grand-jury subpoenas from the US attorney's office in the Eastern District of New York, and the WSJ said they were related to a Brooklyn federal investigation.
Drugmakers and drug distribution companies have faced multiple lawsuits across the US, accused by prosecutors of failing to follow laws aimed at controlling the sale and manufacture of prescription drugs, including opioids. Companies have denied that they have fueled the country's opioid crisis.
Fitch Ratings said on Tuesday that "headline risk" remains on health-care companies in 2020 over opioid-related litigation, as well as court decisions related to the Affordable Care Act and rhetoric coming out of the election.
"Potential credit implications of opioid litigation exposure will vary," Fitch said. "We expect investment-grade issuers to navigate the litigation with credit profiles intact, given the ability to redirect a portion of cash flow from operations from shareholder returns to litigation payments."
Johnson & Johnson told the WSJ they understood the subpoena was part of a broader investigation across the industry, while other companies in the report either didn't respond to requests for comment or declined.
Price: 9.72, Change: -1.00, Percent Change: -9.33
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