Pharmaceutical sector stocks came under pressure on Friday over reports of the criminal probe carried out by the US Department of Justice that investiogates price collusion charges.
The anti-trust probe began two years ago and covers twelve companies, including Sun Pharmaceutical Industries and its US subsidiary Taro, and relates to price collusion charges in 25 drugs in total.
According to a Bloomberg report, while it isn’t illegal for companies to raise prices at the same time, it’s against the law for competitors to agree to set prices or coordinate on discounts, production quotas or fees that affect prices. The federal government can prosecute companies for collusion and seek penalties and potentially send executives to jail.
Sun Pharma stock fell by 7 percent during intra-day trade on Friday. Other stocks including Aurobindo Pharma, Lupin, Dr Reddy's Laboratories and Glenmark with a large exposure to US market took a beating too. Overall the sectoral stocks were down by 3-5 percent.
Suspense over US elections too played its part in dragging the prices down and pharma stocks saw some selling pressure, market sources said.
Though the subject of investigation is collusion in pricing and not price hikes, drug pricing has become a political issue. Democratic party presidential candidate Hillary Clinton has spoken of action against companies raising drug prices steeply.
Stock prices of US generic drug makers fell on Thursday as well and analysts see the reaction in India as a "spill over effrect."
Among the drugmakers who have received subpoenas are industry giants, including Mylan NV and Teva Pharmaceutical Industries Ltd. Even Actavis, which Teva bought from Allergan Plc in August, has been summoned for investigations apart from Lannett Co, Impax Laboratories Inc, Covis Pharma Holdings Sarl, Mayne Pharma Group Ltd and Par Pharmaceutical Holdings.