US probe into price collusion adds to generic drug makers’ woes

Generic drug makers, including Sun Pharma, issued subpoenas by the antitrust division of the US Department of Justice


Sun Pharma and its Israeli-subsidiary Taro Pharma were issued subpoenas, seeking documents relating to employee records, generic products and pricing, communications with competitors and sales of generic products. Photo: Mint
Sun Pharma and its Israeli-subsidiary Taro Pharma were issued subpoenas, seeking documents relating to employee records, generic products and pricing, communications with competitors and sales of generic products. Photo: Mint

Mumbai: A possible price collusion charge by US prosecutors against some generic drug makers has added to the worries of the Indian pharmaceutical industry, which is already confronting compliance issues with the US drug regulator, price erosion and limited product approvals.

Drug pricing has become a sensitive subject in the US in recent times with the government bearing down on pharmaceutical companies for increasing prices.

Most of the clamour has been around increase in prices of branded products, but generics have also come under scrutiny with the antitrust division of the US Department of Justice (DoJ) probing sharp increases in prices of certain generic products and the possibility of drug makers acting as a cartel.

“The bigger worry here is the price collusion allegations. This is a serious charge and if proved, then companies may have to pay a hefty penalty. On the price hikes, if companies are able to justify it, then there won’t be much impact, as US is a free market and increasing prices is not against the law,” said an analyst who did not wish to be named.

Bloomberg reported that the antitrust investigation by the DoJ, which began about two years ago, now spans more than a dozen generic companies and about two dozen drugs. The first charges out of the probe could emerge by the end of the year.

Sun Pharmaceutical Industries Ltd, India’s largest drug maker, and its Israeli-subsidiary Taro Pharmaceutical Industries Ltd were issued subpoenas by the DoJ’s antitrust division, seeking documents relating to employee records, generic products and pricing, communications with competitors and sales of generic products, Bloomberg reported.

Mylan NV, Teva Pharmaceutical Industries Ltd, Actavis, which Teva bought from Allergan Plc in August, Lannett Co Inc, Impax Laboratories, Inc, Covis Pharma Holdings Sarl, Mayne Pharma Group Ltd, and Par Pharmaceutical Holdings are the other companies that were issued grand jury subpoenas, the report said.

The news sent shares of Sun Pharma down 7% to a fresh 52-week low of Rs652.10 on the National Stock Exchange on Friday. The Nifty Pharma Index was down 5%.

In response to queries sent by Mint, a Sun Pharma spokesperson said, “Sun Pharma continues to cooperate with the DOJ Antitrust Division in responding to its subpoena. We have no comments to offer into the details of the pending investigation at this time.”

The possible price collusion charges are indeed disturbing but the reaction of investors in pharma stocks is out of proportion, said Sarabjit Kour Nangra, vice-president of research at Angel Broking Ltd. “It’s nervousness, it should settle down,” she said.

According to the Bloomberg report, Mylan, Mayne and Par Pharma said they were asked about doxycycline, an antibiotic. Another drug possibly under the scanner is digoxin, made by Impax, Lannett, Par Pharma and Sun Pharma, and is used to treat congestive heart failure. Digoxin prices rose nearly sevenfold in late 2013.

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