The Indian pharmaceutical industry has become almost synonymous with the US regulatory authorities. The Indian firms that have slowly expanded their market share in the generics segment have been facing increased American scrutiny over quality issues. While that has been an ongoing process, fresh allegations have been levelled by 44 US states against 20 drug manufacturers for conspiring to artificially inflate prices of more than 100 drugs; some of them by more than 100 per cent.
While Israel’s Teva Pharmaceuticals, the world’s largest producer of generics, is supposedly at the epicentre of the alleged cartel, reputed multinational like Pfizer and Sandoz have been named in the anti-trust lawsuit. Seven of India’s top pharmaceutical companies are also among the 20. The allegations are serious, and the case is being dubbed as the single biggest act of cartelisation in the US. If found guilty, this could serve a serious blow to the Indian pharmaceutical exporters, which consider the US a major market for generics.
In a market with exorbitantly high drug prices, generic drugs, which are copies of branded drugs that are no longer patented, are supposed to be the cheaper alternatives. Thus, they play a crucial role in making healthcare accessible to the people. Their importance in the US market can be realised in the fact that generics account for more than 90 per cent of all prescribed drugs in the country. So, if competition is, in fact, being squeezed out through coordinated action among the drug players, it needs to be addressed urgently as the sector is critical to its consumers.
This results in pricing going up again due to continued demand. The prices can also fall if there are disruptions in the availability of intermediate chemicals that are used in the manufacturing process. Quality control issues and strategic decisions by companies to move away from less profitable generics can push prices upwards as well. Moreover, since the market is characterised by a finite number of firms, an oligopoly exists. As a result, firms respond to what a dominant firm does. If the latter raises prices, the smaller firms do not cut their prices as the dominant one can do the same and drive a few small players out of the market. These factors need to be considered while conducting a probe that is fair.
Considering the reputation of pharmaceutical firms as paragons of greed, it is quite easy for such cases to be swayed by public opinion. The case will also set a precedent for pharmaceutical companies and markets around the world. If any collusion is proven in the court of law, stringent action should be taken to prevent the likelihood of artificially inflating drug prices in the future.