US govt. levies price fixing charges against Indian pharma companies

Excerpt: Sun Pharma, Taro, Zydus, Lupin, Aurobindo Pharma, Dr Reddy's, Wockhardt, and Glenmark have been accused of conspiring to inflate prices of generic drugs in a recent antitrust lawsuit filed by US .

Once again, Indian pharma companies find themselves in a soup in the US. Could blockchain help here? Of the 20 major pharmaceutical firms named in a recent antitrust lawsuit filed by 44 American states, Sun Pharma's US arm, Taro, Zydus, Lupin, Aurobindo Pharma, Dr Reddy's, Wockhardt, and Glenmark Pharma, have been accused of conspiring to inflate prices of generic drugs, by over 1000% in certain cases. Other firms under the scanner include reputed multinational firms like Heritage Pharma, Apotex, Par Pharma, Pfizer, and Sandoz.

The 524-page lawsuit charges them with collusion with the world's largest manufacturer of widely-prescribed generic drugs, Israeli pharma company, Teva Pharmaceuticals. This is quite possibly the largest cartel case in the history of the US pharma industry.

Largest drug cartel in the US? According to the complaint filed by the prosecution, Teva, in turn, colluded with 19 other organisations to inflate the prices of 112 critical drugs between July 2013 and January 2015. Competitors also colluded with each other on drugs that Teva did not market, as per the complaint, thus severely impacting American consumers.

Most parties to the case, including Dr Reddy's and both headquartered in Hyderabad, Telangana, have denied allegations of price rigging, despite the US Department of Justice citing examples and incontrovertible evidence in its filing.

"Clomipramine HCL, also known by the brand name Anafranil, is used for the treatment of obsessive-compulsive disorder, panic disorder, major depressive disorder, and chronic pain. In addition to Defendants Sandoz and Mylan, Defendant Taro also manufactured Clomipramine HCL. Indeed, it was Taro that led a price increase on this product on May l, 2013. The price increase was striking-more than a 3,440% increase to Taro's WAC pricing on certain formulations," the DoJ filing reads.

In December 2016, the Attorney General (AG) of the State of Connecticut along with the Attorneys' General of various other US states filed a lawsuit in Federal Court against Aurobindo Pharma and other generic drugmakers in the US, alleging they violated antitrust laws by fixing prices and allocating customers. This was done with the intention of inflating prices, arresting competition and unreasonably restrain trade for 15 separate generic drugs.

As per the complaint, sales representatives of competing companies met at social events such as conferences, golf outings, cocktail parties and lunch "to discuss and share competitively-sensitive information concerning upcoming 30 bids, specific generic drug markets, pricing strategies and pricing terms in their contracts with customers." The country-wide probe began in 2014, was first filed in 2016, and its scope was expanded in 2018. The case picked up steam in 2017 when two executives of US company Heritage Pharmaceuticals pleaded guilty to fixing prices for two generic drugs, doxycycline and glyburide, agreeing to cooperate with the larger investigation.

"To counter the problem, we are looking at the end-to-end implementation of the blockchain technology and implementation of QR is also ready to be rolled out" for greater transparency, a senior official in the health ministry told The Print. Recently, NITI Ayog, Oracle, Apollo Hospitals and Strides Pharma Sciences ran a pilot blockchain project in the growing battle against fake drug issue.

In the US, mechanisms like "collusive bid rigging and market allocation agreements designed to prevent price wars from occurring" enabled the 20 companies to gouge prices, suggesting they must be outlawed or regulated. Pressure from 44 states will perhaps bring an end to this lethal culture. The leniencies granted to generics must be arrested before fake and overpriced drugs cause more damage, even if it means at the cost of India's pharma industry.

What's next

If found guilty, the penalties may range from a few million to hundreds of millions of dollars. Plaintiff states have demanded a trial by jury which adds an emotive angle to the case, although out-of-court settlements may also be on the table.

Setting the precedent at this juncture is the historic case of Turing Pharma CEO Martin Shkreli, who is currently serving seven years in solitary confinement for hiking the price of Retrophin from $13.50 to $750 a pill. Another instance of pharmas playing gods involves Valeant Pharmaceuticals, whose CEO Mike Pearson infamously slashed the research budget and focused entirely on buying up other companies' medicines and then jacking up the prices.

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