Class-action lawsuits against Indian pharma companies on the rise

Sun Pharma and Dr Reddy's top list in terms of those who face most class-action litigation

The number of class action lawsuits filed against Indian pharmaceutical companies has gone up in recent times. With the US law firms alleging non-disclosure of investor sensitive information, pay-for-delay conspiracies among other violations by these companies.

As many as six drug companies or subsidiaries of the parent generic drug firms from India were named in an over a dozen class action lawsuits for alleged violation of American federal securities laws and anti trust laws either individually or in a group comprising drug companies, including those from other countries.

In a few instances the companies have settled the matter by reaching a negotiated agreement with the law firms while the other class action law suits were either ongoing and while the outcomes of some of these litigations were unknown. Number of class action claims against Indian pharma companies have increased from 2014 onwards. These litigations were filed by law firms representing classes of buyers of medicines including individual purchasers and retail stores or the American investors who own the shares of the respective companies.

Sun Pharmaceutical Industries and Dr Reddy's top the list in terms of those who face more number of class action litigations among the Indian generic players. Aurobindo Pharma Limited, Lupin and erstwhile Ranbaxy, which was later merged with Sun Pharma, and Wockhardt Limited are the other players that were subjected to class action suits in the US.

Some of the European and American drug companies such as Teva and Merck and Co. had paid massive damages running into hundreds of millions of dollars in class action lawsuits in the past. However Indian companies have not encountered the possibility of such a serious material impact in cases they faced so far though there were instances where some Indian companies had settled the claims through negotiated agreements with the law firms.

In one of the earliest instances of a negotiated settlement, Sun Pharma's American subsidiary Caraco Lab had settled the class action suit with former employees for around $3 million way back in 2012. In a latest instance, India's second largest pharma company Lupin along with Sandoz, which is a subsidiary of Swiss multinational drug firm Novartis, have exited a class action litigation by agreeing to pay $6.7 million in April this year. These two companies along with American company Impax were accused of conspiring with Medicis to delay the launch of generic version of the latter's acne treatment drug Solodyn in the US market.

In 2014 Dr Reddy's had entered into a negotiated settlement in a class action law suit filed a year before. This litigation was filed against Dr Reddy's, Ranbaxy and Israeli multi-national Teva Pharmaceuticals for allegedly entering into a pay-for-delay conspiracy with AstraZeneca to delay the launch of its generic version of heart burn drug Nixium. In this particular case the plaintiffs had agreed to release Dr Reddy's from all the claims in exchange for its cooperation in the ongoing trial against rest of the companies.

In the aftermath of a warning letter from the US Food and Drug Administration (USFDA) issued against three of its manufacturing facilities, Dr Reddy's was subjected to multiple class action suits for violation of federal securities laws. Soon after the warning letter was issued US law firm Lundin Law filed a suit accusing the company of making misleading statements leading to the investor loss in connection with the USFDA inspections. In August, 2017 another law firm Khang and Khang LLP filed another class action suit seeking damages while making similar allegations involving nondisclosure of information related to the FDA findings.

Price manipulation or pay-for-delay conspiracy has been one of the recurrent themes of these class action suits, often involving several companies from across geographies. In one such anti trust case, 20 state attorneys of general had sued a group of six drug companies, namely Aurobindo, USA, Mylan, Teva, Heritage Pharma, Citron Pharma and Mayne Pharma for allegedly inflating the prices of drugs in December last year.

Class action law suits

August, 2009: Class action lawsuit was filed against Sun Pharma's US subsidiary Caraco Pharmaceutical Lab by some former employees of a manufacturing unit, which was shut down in the same year. The ex-employees alleged that they were laid off without giving a prior notice.

February 2012: Another securities fraud lawsuit was filed against Caraco Pharma on behalf of the investors, alleging that its management had misrepresented the scop of severity of alleged FDA violations that subsequently led to the closure of the plant. Plaintiffs claimed that their investments lost substantial value following the FDA raid on this facility. The company settled the litigation for $2.975 million

May, 2015: Class action lawsuit against Ranbaxy by customers of Roche's anti viral drug Valcyte and Novartis' drug Diovan. It was alleged that Ranbaxy had wrongfully gained market exclusivity for the generic versions of these drugs and delayed the launch.

November, 2016: A pair of lawsuits were filed against two groups of drug makers that include Novartis AG, Perrigo Co., Wockhardt Limited, Taro Pharmaceuticals(Sun Pharma subsidiary) for alleged collusion to raise prices of two dermatology creams

June 9, 2017: KPH Healthcare Services Inc. filed 4 anti trust class action suits against several drug firms including Dr Reddy's Laboratories, Sun Pharmaceuticals, Mylan, Novartis and Teva for jacking up prices of certain generic drugs since 2013-2014.

December, 2013: Massachusetts Federal Court approved a class action suit against AstraZeneca, Dr Reddy's, Ranbaxy, and Teva. They were allegedly engaged in an overarching conspiracy to delay the introduction of generic versions of the Nixium drug in the US market. In October, 2014 Dr Reddy's enters settlement with the plaintiffs while agreeing to provide various forms of cooperation at the trial.

November, 2015: Los Angeles-based law firm Lundin Law has filed a class action suit against Dr Reddy's Limited for possible violation of federal securities laws in the aftermath of a warning letter issued by the US Food and Drug Administration(USFDA) against three of its manufacturing facilities.The law firm alleged that certain statements made by the company were false and misleading.

August, 2017: US law firm Khang and Khang LLP filed a class action lawsuit against Dr Reddy's with similar allegations related to the regulatory inspections and the US FDA's warning letter.

December, 2016: 20 state attorneys general in the US sued a group of six drug companies, namely Aurobindo Pharma, USA, Mylan, Teva Heritage Pharma, Citron Pharma and Mayne Pharma alleging that these companies had entered into illegal conspiracies in order to unreasonably restrain trade, artificially inflate and manipulate prices and reduce the competition.

August, 2015: Anti trust class action lawsuit filed against Medicis Pharmaceuticals, Lupin, Impax and Sandoz for alleged pay-for-delay conspiracy involving acne drug Solodyn. In April, 2017 Sandoz and Lupin had agreed to pay $ 6.7 million to exit the litigation.