 "Sun Pharma, Dr Reddy’s in US probe on cartelisation")
The US Department of Justice (DoJ) began the probe into the matter two years ago and it covers over a dozen companies, including Indian generic drug makers, and relates to about two dozen drugs.
Over the past several months, the companies were issued summons by the DoJ to share details of pricing and sale of the products. A grand jury probe is examining whether some executives collided to raise prices and the first charges could emerge by the end of the year, a Bloomberg report said.
In their filings to the New York Stock Exchange in August and September, respectively, Dr Reddy’s and Taro confirmed they had received subpoenas from the US DoJ seeking information related to pricing and sale of generic drugs. Taro said two officers from its commercial team, too, had been issued the summons while Dr Reddy’s said, additionally, it was asked to submit information by the Attorney General of Connecticut state.
In their filings, the companies said details sought pertained to corporate and employee records, generic pharmaceutical products and pricing, communication with competitors and others regarding sale of the products. The companies said they were co-operating with the investigation agencies. Sun Pharma said it had no further comments on pending investigation while Dr Reddy’s too declined an additional comment.
While Indian companies have not identified the drugs which are the subject of investigation by the US DoJ, analysts said it covered a drug used for treating bacterial infections and another used against heart ailments. The anti-trust investigation comes at a time when drug makers are already facing the heat over abnormal price hikes of certain products in the US. The issue got politicised with Democratic presidential candidate Hillary Clinton promising action against price gouging by drug makers.
The possibility of US DoJ widening its probe against more drug makers and products, and the suspense over the US presidential election results weighed on the stock markets on Friday.
The BSE Healthcare index fell 4 per cent. Sun Pharma stock took the maximum hit as it dropped 7.4 per cent, while Dr Reddy’s lost 5.6 per cent. Other drug companies not named in the investigation too bore the brunt. Stock prices of other pharma companies that were not part of DoJ’s investigation also took a hit on Friday.
In a note Morgan Stanley said Friday’s market fall was an over-reaction and it may take several months before the outcome of the probe is known. It also said sales exposure to investigated products is likely to be small. In a note to its investors, Edelweiss Research said proving charges of cartelisation would be difficult. “Prosecutors have generally found it difficult to win price collusion cases, because of the high barrier that courts have erected to prove a conspiracy among different companies that needs evidence such as written documents or telephone conversations,” analysts of Edelweiss Research said in their note. They added that price-led growth in the US market was not sustainable and growth will become a challenge with increasing competition. “The only avenue for Indian generic companies will be to move up the speciality pharma curve,” analysts said.
