At a time when governments across the world crack down on healthcare costs, generic drugmakers in India took a hit as details of a case filed by 44 US states on alleged drug price manipulation emerged.

Among the twenty drugmakers named in the case are Indian generic drugmakers including Sun Pharma, Aurobindo, Lupin, Zydus, and Glenmark.

A foreign media report quoting state attorneys general said, “The complaint, filed on Friday in the US District Court in Connecticut, said the drug companies engaged in numerous illegal conspiracies in order to unreasonably restrain trade, artificially inflate and manipulate prices and reduce competition.” The price inflation and manipulation was across products and treatments and according to the report, in some cases the price collusion was more than 1,000 per cent. Price-collusion allegations in the US have cast a deep long shadow over generic drugmakers for about five years now involving companies Mylan, and India’s Emcure Pharma, whose Heritage Pharmaceuticals was in the dock.

Generic drugs are chemically similar versions of innovative drugs and are marketed in the US once the patent protection period has expired on the innovative drug. The entry of generics results in price erosion of over 90 per cent on the originator’s drug. Generics are often favoured by policymakers to bring down healthcare costs, which is why the allegations of price collusion hurt the generic drug industry.

Tough time ahead

The latest development over the weekend brings more bad news for the generic drugs industry, said Ranjit Kapadia, Senior Vice-President with Centrum Broking. “India has a price control mechanism, unlike the US where competition keeps prices in check. The recent price-related allegations may build a case for the US too to look at mechanisms to control medicine prices. And with Teva, the largest generic drugmaker facing the heat, the impact would percolate to smaller companies.”

Sun Pharma’s stock price tumbled over 20 per cent on Monday following the weekend development, but it recovered to end the day at ₹396 a piece on the Bombay Stock Exchange, down close to 10 per cent. Lupin shares closed down about 4 per cent at ₹801 and Glenmark ended the day at ₹591, down over 4 per cent. Reports from Israel indicated that Teva shares fell over 10 per cent on the Tel Aviv Stock Exchange during Sunday trading, though company topbrass denied wrong doing and said they would defend themselves.

A Sun Pharma spokesperson said, “We believe the allegations made in these lawsuits are without merit and we will continue to vigorously defend against them.”

An Indian industry representative clarified that some Indian companies have been caught in the net as investigations threw up communications between different company officials, though sales revealed no excessive behaviour.

With the Trump government training its guns on drug companies and escalating prices, the last word is far from heard on this legal battle.

comment COMMENT NOW