HYDERABAD: If history is any precedent, pharma companies facing allegations of drug price rise in the US may have to face fines, or sit down for a settlement. “The investigation, which has been ongoing since 2016, with the first case filed in December 2016, may take up to two years to resolve and could result in fines for the firms involved, if prior cases of such alleged collusions are an indication,” said Piyush Nahar, equity analyst, Jefferies India.
In the past, companies paid fines, while some even received prison terms. For instance, 46 auto parts makers and 65 individuals were charged with price-fixing in an investigation stretching 16 years between 2001 and 2016. Eventually, companies paid a staggering $2.8 billion, while 31 individuals were jailed. According to Nahar, the ongoing anti-trust action against pharma firms may take 1-2 years before a ruling happens. “We view a settlement as the most likely outcome,” he said.
Among the Indian firms, Sun Pharmaceuticals is likely to take the biggest hit, with Jefferies estimating its earnings at a staggering $1 billion from price hikes during FY 2013-17, while Lupin has likely earned $250 million. However, both Sun Pharma and Lupin, in separate clarifications to bourses, said the ongoing litigation won’t have material impact on their operations or financial results. Similarly, Dr Reddy’s Laboratories, whose US subsidiary was named a defendant with respect to five generic drugs (Ciprofloxacin HCL tablets, Glimepiride tablets, Oxaprozin tablets, Paricalcitol and Tizanidine), for an alleged “overarching conspiracy”, said that it intends to vigorously defend the allegations. “Currently, we do not foresee any material impact to our operations and consolidated results with respect to this matter,” Dr Reddy’s said.
On May 10, the Attorney General of 49 US states, the Commonwealth of Puerto Rico and the District of Columbia filed a complaint against 21 generic pharmaceutical companies and 15 individual defendants with respect to 116 generic drugs. All related cases and certain private plaintiffs’ class-action suits would be consolidated in the multi-district litigation ‘In re: generics pharmaceuticals anti-trust pricing litigation’.
A 2016 US government report found that 25 per cent of the 1,440 drugs it investigated took at least one extraordinary price hike of over 100 per cent between 2012 and 2017, from which companies had benefited. In fact, in December 2016, the US Department of Justice filed the first charges against two former executives of Heritage Pharma, an Emcure Pharma subsidiary, for alleged collusion in pricing of two drugs, namely doxycycline hyclate and glyburide. In addition, 20 state attorney generals filed cases against five firms including Teva, Mylan, Citron Pharma, Heritage Pharma and Aurobindo Pharma for the same drugs, according to Jefferies.