More than 40 states in the US filed a lawsuit alleging drug manufacturers of conspiring to inflate prices of many commonly used medications. The litigation has come as a fresh blow to generic pharmaceutical companies.
The complaint names 20 pharmaceutical companies, including seven Indian companies. The Indian firms named are Aurobindo, Dr Reddys, Glenmark, Lupin, Wockhardt, Zydus and Sun Pharma’s US arm Taro. All these are listed entities.
Court documents indicate that over 1200 drugs, some of them the most commonly prescribed, saw their prices jump by an average of 400 percent in one year. Allegations are that company officials met in person to discuss plans.
The complaint, which runs into 500 pages, is linked to another suit filed by US states in December 2016 which is still under litigation. The other generic companies named in the lawsuit include the world’s largest generic drug manufacturer Teva Pharma, Pfizer, Sandoz, Mylan and Actavis, among others. Besides companies, the lawsuit has also named 15 executives with various pharma companies, five of them from Indian companies. The complaint spans drugs of all kinds -- from tablets and capsules to creams and gels -- with price fixing dating back to 2006. The allegation is that these companies colluded to increase prices of drugs, sometimes by over 1000 percent.
In the new litigation, more number of drugs have been linked to companies with granular evidence. The May 2019 litigation covers around 112 drugs. The main allegation is that Teva, from July 2013 to January 2015, ‘significantly’ raised prices of these 112 drugs, colluding with ‘high quality’ competitors on at least 86 of them.
So where Indian do companies stand? While analysts wait for more details to filter in, they are factoring in higher operating costs due to current and future litigations and possible penalties. This litigation is also an example of an increasingly tougher, uncertain and more scrutinised generic drug price environment in the US. Examples include Pfizer agreeing to roll back price hikes temporarily last year or the US Senate holding a hearing on generic prescription prices earlier this year. The next stop the street will be watching for is US elections and whether the noise increases closer to it.
“We believe the allegations made in these lawsuits are without merit and we will continue to vigorously defend against them,” a Sun Pharma spokesperson told CNBC-TV18.
Court documents from the June 2018 indicate that between February 20, 2013 and December 20, 2013, over 41 weeks, there were over 40 different tradeshows and conferences where companies had the opportunity to meet and talk face to face on drug prices. Similarly, the May 2019 court document cites ‘industry dinners’ as an excuse for executives to meet. In January 2014, the time when prices of a number of generic drugs had or were increasing, 13 ‘high ranking’ executives met at a restaurant. This included CEOs, presidents, and senior vice-presidents of generic drug companies. Other such events included golfing, which comprised golfing during the day and socialising in the night, and Girls Nights Out where apparently sensitive information was exchanged.
In a statement to CNBC-TV18, Dr Reddy's Laboratories said, "We do not comment on ongoing litigation. Please refer to our public securities filings related to this matter."In an interview to CBS, Connecticut Attorney General William Tom provides examples of such price increases. For example, price of Doxycycline Hyclate, an antibiotic, increased over 8000 percent between 2013 to 2014 to cross $1800. Similarly, asthma medicine Albuterol Sulfate saw its prices rise by over 4000 percent to over $400 and cholesterol drug Prevastain saw its price rise by around 500 percent. The June 2018 complaint mentions the communications generic manufacturer Heritage Pharma had or tried to have with Sun Pharma on calcium channel blocker drug Nimodipine and with Dr Reddys on cancer injection Zoledronic Acid and anti-anxiety drug Meprobamate. The May 2019 document highlights incidents of companies such as Teva, Taro and Wockhardt discussing allocation of the market for
hypertension drug Enalapril Maleate and Teva and Taro talking to Sandoz on prices of anti-fungal Ketoconazole cream.
The litigation is apparently backed by evidence including text messages, documents and emails to prove that the price hikes were not due to shortages but profiteering. The June 2018 court documents point to over 500 calls or texts between executives of Heritage pharma and current defendant pharma companies and similarly over 1500 calls or texts between Teva executives and the current defendant pharma companies, all between July 2013 to July 2014. Similarly, the May 2019 documents highlights similar communications. For example, of 1389 calls made by three executives of Teva in 2013, 89 percent involved speaking with competitors and of 941 calls made in 2014 by two Teva executives, 83 percent was to competitors. Pharma executives, as per the litigation, referred to terms such as ‘fair share’ and ‘playing fair in the sandbox’ and ‘high quality competitors’ as lingo used between defendants.