Hyderabad: The US arm of Sun Pharmaceutical Industries Ltd, India’s largest drug maker, received a summons from the anti-trust division of the US Department of Justice (DoJ), asking the firm to appear before a grand jury. The anti-trust division deals with anti-competitive practices such as price gouging where prices are spiked unethically, beyond what’s reasonable.

Here are the five things about the summons or subpoena issued to Sun Pharma and the escalating generic drug prices in the US.

1.What did the anti-trust division ask for?

Sun Pharma did not elaborate on the reasons for the summons but said the DoJ sought documents from its US subsidiary and its affiliates on corporate and employee records, generic pharmaceutical products and pricing, communications with competitors and others regarding sales of generic pharmaceutical products and certain other related matters.

The company said its unit was in the process of responding to the subpoena, adding that “the outcome of the above-referred inquiry is unlikely to have any material adverse impact" on its operations or financial results.

2.Why was this action all of a sudden?

The specifics of the summons are not immediately clear. The prices of generics have come under increasing scrutiny by the government and insurance companies. A 2014 study released by the Healthcare Supply Chain Association, a trade body for group purchase organization, calculate that at least eight different generic drugs, including doxycycline, saw price increases of more than 400% from October 2013 to April 2014.

3.Are there other companies who have been served with a summons by DoJ?

The other subpoenaed companies includeMylan NV, Lannett Company Inc., Impax Laboratories Inc., Endo Pharmaceuticals Plc, Par Pharmaceutical Cos. Inc. and Allergan PLC. Mylan, in a disclosure to the Securities Exchange Commission in December, said it has received subpoena from the US antitrust division related to the marketing and pricing of its generic antibiotic Doxycycline.

4. Why is the US government acting tough?

U.S. Senator Bernie Sanders and Democratic Representative Elijah Cummings opened an investigation in October 2014 into 14 drug companies, including Sun Pharma, Dr. Reddy’s Mylan and Teva Pharmaceutical Industries, over price increases of generic drugs.

In February, Sanders and Cummings asked the department of health and human services to investigate increases in generic drug prices. As an example, they cited doxycycline hyclate 100-mg capsules, the price of which had more than doubled in the year through June 2014.

The discussion over drug pricing has intensified and become part of the US presidential candidate Hillary Clinton’s campaign after Turing Pharmaceuticals jacked up the price of Daraprim, a generic medication for parasitic infections, by 5,000% in one day, resulting in the arrest of its chief executive officer Martin Shkreli. Turing has jacked up the price of Daraprim, a decades-old anti-parasitic drug by 5,000%, from $13.50 to $750 a pill.

5. Why do generic prices escalate?

There could be many reasons for price increase of generic drugs, including drug shortages, supply disruptions on account of regulatory issues, and consolidations within the generic-drug industry.

A study by the New England Journal of Medicine titled ‘High-Cost Generic Drugs — Implications for Patients and Policymakers’ cited that between 2002 and 2013, some manufacturers of Digoxin — which is still used for atrial fibrillation and heart failure — faced safety-related drug recalls and FDA inspections, and the number of manufacturers of oral Digoxin (tablet) fell from eight to three. During that time, the drug’s price reportedly increased by 637%. Similarly, the price increase for doxycycline was most likely exacerbated by a national shortage in 2013, which the FDA attributed to increased demand in the face of limited manufacturing capacity.

Close