As a step-up to the ongoing probe by the anti-trust department of the US Department of Justice (DoJ), initiated in October 2014, on the sharp increases in prices of certain generic drugs in the US and the possibility of cartelisation among the drug makers, 20 US States filed a lawsuit on December 15, 2016 against six pharmaceutical companies – Aurobindo Pharmaceuticals Limited, Citron Pharma LLC, Heritage Pharmaceuticals Inc., Mayne Pharma, Mylan NV and Teva Pharmaceuticals. The lawsuit alleges these companies for conspiring the prices of two generic drugs –Doxycycline Hyclate (an anti-biotic) and Glyburide (an anti-diabetic drug).
The lawsuit further alleges some executives of these drug companies responsible for the same. The US DOJ has already levied criminal charges against two executives of a pharma company for the price collusion.
According to Kinjal Shah, assistant vice president & associate Head - Corporate Ratings, ICRA, “Over the past several months, over a dozen companies have been issued summons by the DoJ to share details of pricing and sale of the products. While the investigation is currently limited to few drugs, it is expected to be expanded to include more products and more companies. While there is a possibility of cartelisation in some cases, there may be valid reasons for price hikes in certain cases, including among others, shortage in drug/API supply due to companies facing compliance issues with the US FDA or exiting markets due to unviable volumes and increase in cost for generic pharma companies with increased regulatory costs.
“Nonetheless, such increased generic pricing related scrutiny is a concern for Indian pharmaceutical companies; and given the heightened focus on controlling drug prices in the US, implementation of certain legislative proposals could have significant implications for pharmaceutical pricing. These can have significant impact on the revenue growth as well as profit margins of these companies. Further, the penalties associated with the charges would also be substantial”.
