7 Indian drug makers named in US lawsuit for inflating prices of generic medicines

A total of 44 US states got together on Friday to file a lawsuit against as many as 20 pharma companies, including seven Indian firms, for engaging in illegal conspiracies to stifle competition for generic drugs and even illegal profiteering in over 100 different drugs. The lawsuit accuses Teva Pharmaceuticals USA Inc of orchestrating a sweeping scheme with 19 other companies to inflate drug prices, by more than 1,000% in some cases, reported Reuters. The 7 Indian drug makers named in the lawsuit are Wockhardt, Dr Reddy's Laboratories, Aurobindo Pharma, Glenmark Pharmaceuticals, Lupin, Zydus Pharma (Cadila Healthcare), and Taro Pharmaceutical Industries - a subsidiary of Sun Pharma, which is India's largest pharma company by sales. Five executives of the above firms have also been named in the case, Mint reported.

The 500-page lawsuit filed in the US District Court in Connecticut is reportedly parallel to an action brought in December 2016, which is still under litigation, but the scope has been significantly expanded now. The 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 claimed. Furthermore, the complaint states that the accused executives had used industry dinners, cocktail parties and golf outings to perpetuate the scheme, in addition to communicating through text messages and telephone calls.

The drugs mentioned in the complaint included everything from tablets and capsules to creams and ointments to treat conditions including diabetes, high cholesterol, high blood pressure, cancer, epilepsy and more. The lawsuit seeks damages, civil penalties and actions by the court to restore competition to the generic drug market. Potential fines could exceed $2 billion, given that generic drug firms were making higher profits during the time in question, Steven Tepper, an analyst at Israel Brokerage and Investments, told the daily.

Reacting to the news, Indian pharma stocks took a beating 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 Rs 396.85 while Dr Reddy's fell 2.5% to Rs 2,804.95. However, the sector is in the green today, trading 86 points higher at 13,396 level.

"We believe the allegations made in these lawsuits are without merit and we will continue to vigorously defend against them,"  a Sun Pharmaceutical spokesperson told the daily. The firm is already under the SEBI's scanner for allegations of fund diversion apart from corporate governance issues.

Aurobindo Pharma, too, said in a regulatory filing that it is currently reviewing the second lawsuit and said "we expect that we will be filing papers with the Federal Court in due course denying each of the relevant accusations". The Hyderabad-based firm said it does not, at this time, anticipate that these matters will have a material impact on the company's operations or business results.

Investors desert healthcare counter; Sun Pharma plunges over 9%

Incidentally, pharma companies are also under the regulatory scanner at home for similar charges of profiteering. According to the National Pharmaceutical Pricing Authority (NPPA), there have been 1,991 cases of overcharging customers under the Drug Prices Control Orders (DPCOs) between August 1997 and March 2019, cumulatively amounting to nearly Rs 6,285 crore with interest. In as many as 666 cases, pharma companies are yet to disgorge excess profits accrued by selling medicines at prices higher than those notified by the drug pricing regulator.

According to latest available NPPA data on the official website, Wockhardt Limited and Medibios laboratories is the biggest case stuck in litigation under DPCO 2013. The total outstanding amount stands at Rs 60.68 crore as of end-March for its formulation Alphadopa 500 mg, which is used in the treatment of high blood pressure. The other biggies on the list are Pfizer for Corex cough syrup with challenged dues of Rs 48.46 crore, Zydus Healthcare's Atorva 20 tablets (Rs 41.54 crore) and Sun Pharma Laboratories' Rosuvas 20 tablets (Rs 32.46 crore).

Under DPCO 2013, NPPA fixes the ceiling price of essential medicines of Schedule I based on simple average of all medicines in a particular therapeutic segment with sales of more than 1 per cent of the category.

Sushmita Agarwal with agency inputs

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