Price collusion charges of US DoJ may impact Indian pharma cos adversely: ICRA
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Our Bureau, Mumbai
December 22 , 2016
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As a step-up to the ongoing probe by the anti-trust department of the US
Department of Justice (DoJ), initiated in October 2014, on the sharp
increases in prices of certain generic drugs in the US and the
possibility of cartelisation among the drug makers, 20 US States filed a
lawsuit on December 15, 2016 against six pharmaceutical companies –
Aurobindo Pharmaceuticals Limited, Citron Pharma LLC, Heritage
Pharmaceuticals Inc., Mayne Pharma, Mylan NV and Teva Pharmaceuticals.
The lawsuit alleges these companies for conspiring the prices of two
generic drugs –Doxycycline Hyclate (an anti-biotic) and Glyburide (an
anti-diabetic drug). The lawsuit further alleges some executives
of these drug companies responsible for the same. The US DOJ has
already levied criminal charges against two executives of a pharma
company for the price collusion.
According to Kinjal Shah,
assistant vice president & associate Head - Corporate Ratings, ICRA,
“Over the past several months, over a dozen companies have been issued
summons by the DoJ to share details of pricing and sale of the products.
While the investigation is currently limited to few drugs, it is
expected to be expanded to include more products and more companies.
While there is a possibility of cartelisation in some cases, there may
be valid reasons for price hikes in certain cases, including among
others, shortage in drug/API supply due to companies facing compliance
issues with the US FDA or exiting markets due to unviable volumes and
increase in cost for generic pharma companies with increased regulatory
costs.
“Nonetheless, such increased generic pricing related
scrutiny is a concern for Indian pharmaceutical companies; and given the
heightened focus on controlling drug prices in the US, implementation
of certain legislative proposals could have significant implications for
pharmaceutical pricing. These can have significant impact on the
revenue growth as well as profit margins of these companies. Further,
the penalties associated with the charges would also be substantial”.
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