US Generics Price Probe Nearing Climax?

15.11.2016 -

The US Department of Justice (DOJ) is stepping up its broad criminal investigation into suspected price fixing for generic drugs. A Grand Jury probe in the two-year-old case is examining whether some executives agreed on raising prices, and the first charges could be filed by the end of the year, the news agency Bloomberg has reported. The news led shares of all companies named in the investigation to fall, some by a double-digit margin.

Following several incidences of sharp drug price increases over the past year or two, US lawmakers have cast a critical eye at the pharmaceutical sector. Up to now, the focus has been mainly on the more expensive ethical drug sectors but suspicion of price gouging has now widened to include generics. Sources quoted by Bloomberg said the investigations initially focused on mid-sized US companies but more recently have been extended to the biggest manufacturers and US subsidiaries of overseas companies.

Generics producers that have received subpoenas so far have been identified as Mylan and Teva as well as Actavis, which Teva bought from Allergan in August of this year, in addition to Impax Laboratories, Covis Pharma Holdings, Sun Pharmaceutical Industries, Mayne Pharma Group, Endo International subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical Industries.

All of the companies are said to be cooperating with the authorities except Covis. The US federal government has the power to prosecute companies for collusion, and penalties can include imprisonment. Bloomberg’s sources said charges could extend to high level executives.

The anonymous industry insider added that the DOJ’s antitrust division, whose immunity program encourages offenders to confess and inform on others, “has stepped up its commitment to holding individuals responsible.” One analyst said the fines could be “significant,” but generic drugmakers are more worried about potential calls for more oversight.

While generic drugmakers are said to have made “various disclosures” about the inquiry, authorities apparently have identified only a handful of drugs under scrutiny, including Digoxin, a heart failure drug, and doxycycline, a widely prescribed antibiotic. Digoxin prices are seen as having increased nearly sevenfold in late 2013.

The sector is also facing a civil price-fixing probe by Connecticut Attorney General George Jepsen. The New England state reportedly is seeking to lead a group of other states to probe the industry. This could lead to court cases seeking damages, Bloomberg’s sources said.

According to industry figures, generic drugs account for 88% of prescriptions dispensed in the US. Industry-wide turnover is believed to have totaled about $70 billion in 2015, after discounts and rebates to payers. A report by the Los Angeles Times said some generic prices have soared in recent years despite heavy competition. Citing data from the Medicare program, which provides healthcare for senior citizens, it said eight of the ten drugs showing the biggest price hikes in 2014 were generics with multiple manufacturers.