Cost of High Prices

Cost of High Prices

There are lessons for Indian pharma companies from the drug pricing concerns in the US.

Photo: Ajay Thakuri Photo: Ajay Thakuri

Selling drugs at a high price has never been a good idea, more so, if one increases the price in an election year. And recent developments in the US should send a clear message to Indian pharma majors.

Sun Pharma subsidiary, Taro Pharma-ceuticals, in its filings to the US Securities and Exchange Commission, said that on September 8, 2016, Taro USA, and two of its senior officers, have received a grand jury subpoena from the Antitrust Division of US Department of Justice, which sought documents related to corporate and employee records, generic pharmaceutical products and pricing, communications with competitors and others regarding the sale of generic pharmaceutical products. "Taro intends to respond to the subpoena and, otherwise, cooperate with the Department of Justice investigation," the company informed. It is, however, not clear yet whether the inquiry was over price increase or about antitrust. Taro manufactures and supplies topical dermatological products and solid dosage form products (pills) used in cardiology and neurology.

Since companies are not required to get an approval on decisions relating to drug pricing because of the free-market dynamics in the US, the underlying belief is that in an unregulated market, people expect responsible behaviour from manufacturers.

But this does not seem to be the case always. And, US presidential candidate Hillary Clinton has shown concern over outrageous price increases in her tweets. Says D.G. Shah, Secretary-General, Indian Pharmaceutical Alliance: "The need for moderation and on being reasonable can never be overemphasised." He feels it is important for companies to pay heed to the current environment where there is increased sensitivity to high drug prices. "Indian companies have generally been conservative in their pricing and, in fact, a study by Morgan Stanley in 2014 had shown that in 92 per cent of the cases, medicines from India were being sold in the US at the same price as in the previous year, if not lower," Shah adds.

Nevetheless, analysts say Indian pharma companies must be more cautious. "It is becoming more and more difficult for companies to take a price hike in the current environment. Mylan did it, but had to backtrack," says a leading Mumbai-based pharma analyst. In a recent press release, Mylan had said: "The US subsidiary will launch the first generic to EpiPen auto-injector at a list price of $300 for a two-pack carton, which represents a discount of more than 50 per cent to the Mylan list price of the branded medicine." Auto-injectors are used in emergency treatment of life-threatening allergic reactions.

Barring Taro, there are no immediate worries for Indian firms, say analysts, because the US stance was not about targeting Indian companies. In fact, today there are many instances of US pharma companies, including Valeant Pharmaceuticals and Turing Phar-maceuticals, coming under pressure to make drugs more affordable. It is, however, ironical that the US, which is going after generic drug makers, has rarely intervened in cases of exorbitant prices of patented drugs.