General views of drugs. (Photographer: Dhiraj Singh/Bloomberg)

Seven Indian Drugmakers Named In U.S. Lawsuit For Inflating Prices Of Generics

The Nifty Pharma Index fell the most in nearly 30 months yesterday led by Sun Pharmaceutical Industries Ltd. and Cadila Healthcare Ltd. over concerns that a U.S. lawsuit accused seven Indian drugmakers, among other firms, of price fixing.

As many as 44 U.S. states have filed a federal lawsuit accusing 20 generic companies and 15 company executives of colluding to artificially inflate generic drug prices—the second in this regard since 2014, which was filed in U.S. Court for the District of Connecticut. Six officials from Indian companies, too, have been named in the suit that runs over 510 pages. The states, as per court documents, have sought to increase damages to thrice the profiteered amount.

The complaint alleged that the companies coordinated with each other to fix prices, allocate markets and rig the bids for over 100 different generic drugs. A bulk of the alleged collusion happened between July 2013 and January 2015, the complaint said, when the prices of 114 generic drugs were inflated. The complaint also lists numerous communications through phone calls, emails, text messages and industry dinners at various levels of the defendant companies with other generic manufacturers.

Anubhav Aggarwal, pharma analyst at Credit Suisse, said in a recent report that the Indian companies could potentially pay a penalty that’s thrice their earnings in sales. According to his calculations, the sale amounts of Indian companies that are under investigation are:

  • Lupin Ltd.—$27 million.
  • Glenmark Pharmaceuticals Ltd.—$80 million.
  • Taro (a unit of Sun Pharma)—$370 million.
  • Cadila Healthare—$10 million.
  • Dr. Reddy’s Laboratories Ltd.—$130 million.

Any conviction in the drug price fixing probe will be an overhang for the companies in question, said Alankar Garude, pharma analyst at Macquarie. Penalties, he said in a recent report, could be twice the profiteered amount and individual victims can seek civil recovery of up to thrice the amount of damages suffered.

Morgan Stanley's Pharma Analyst Sameer Baisiwala told BloombergQuint that he expects the firms to respond to the complaint soon.