NEW DELHI/WASHINGTON: Seven Indian drug makers, including Sun Pharmaceutical Industries Ltd and Dr Reddy’s Laboratories Ltd, and five of their executives have been named in a US lawsuit that accuses Israel’s Teva Pharmaceutical Industries Ltd of orchestrating a conspiracy to raise medicine prices.
The antitrust lawsuit was filed by 40 US states on 10 May and is based on a five-year investigation of the firms. Other Indian generic drug makers named in the lawsuit are Aurobindo Pharma Ltd, Glenmark Pharmaceuticals Ltd, Lupin Ltd, Wockhardt Ltd and Zydus Pharma.
The lawsuit accuses 20 drug makers of conspiring to inflate prices of more than 100 different drugs, significantly broadening a 2016 complaint. In addition to the states, the justice department’s antitrust division is conducting a criminal probe. The complaint is an expanded document of suit, which is still under litigation and was filed by US states in December 2016.
The states claim that the drug makers conspired with one another to fix prices and carve up markets for medicines among themselves, rather than compete on price. Executives used industry dinners, cocktail parties and golf outings to perpetuate the scheme, in addition to communicating through text messages and telephone calls, the complaint said.
Indian pharma stocks declined in Mumbai on Monday. BSE’s healthcare index fell 3.53% to 13,310.47 points. Shares of Sun Pharmaceuticals plunged 21% in intraday trading, but ended the day down 9.39% to ₹396.85 on the BSE. Dr Reddy’s fell 2.5% to ₹2,804.95.
A Sun Pharmaceutical spokesperson said, “We believe the allegations made in these lawsuits are without merit and we will continue to vigorously defend against them."
The US complaint puts Teva at the centre of the conspiracy, saying it colluded with a core group of competitors to follow each other’s price increases. During a 19-month period from 2013 to 2015, Teva significantly raised prices on about 112 generic drugs and colluded with its competitors on at least 86 medicines, the states said. While the size of the increases varied, some were more than 1,000%.
“Teva is a consistent participant in the conspiracies identified in this complaint, but the conduct is pervasive and industry-wide," according to the complaint that was filed in federal court in Connecticut. “Through its senior-most executives and account managers, Teva participated in a wide-ranging series of restraints with more than a dozen generic drug manufacturers, all of whom knowingly and willingly participated."
In a statement, Kelley Dougherty, a Teva vice-president, said, “The allegations in this new complaint and in the litigation more generally, are just that—allegations."
The US states are seeking unspecified damages and penalties from the firms. Potential fines could exceed $2 billion, given that generic drug firms were making higher profits during the time in question, said Steven Tepper, an analyst at Israel Brokerage and Investments. That strikes a blow to Teva, struggling to pay back $29 billion of debt—a sum almost twice its market value.
“We have hard evidence that shows the generic-drug industry perpetrated a multi-billion dollar fraud on the American people," Connecticut attorney general William Tong said in a statement on Friday. “We all wonder why our healthcare, and specifically the prices for generic prescription drugs, are so expensive in this country—this is a big reason why."
The firms have argued that price increases were due to factors such as industry consolidation and regulator-mandated plant closures.