Governance

When generics turn into Big Pharma

Top generics firms, some from India, are charged with price-fixing and sleazy deals; Sun Pharma has paid up to settle claims  

 
By Latha Jishnu
Published: Tuesday 25 April 2023
Illustration: Yogendra Anand / CSE

In the old days, generics makers were the good guys. They took on Big Pharma, battled them in courts and forced government to deploy the laws that challenged the monopolies of multinationals to produce generic versions of life-saving drugs at a fraction of their original cost. They saved millions of lives. 

We are speaking in the main about the Indian generics industry. It was adept at turning out quality versions of the medicines made by originator companies and the world looked up to it while the drug giants seethed and launched a no-holds barred attack on it and the Indian government.

Much has changed since those halcyon days. Now we have the generic arms of multinationals that are among the big names of the industry, such as Novartis’s Sandoz and Pfizer’s Viatris, while generic companies have also grown into billion-dollar companies like Teva of Israel, the leader, and India’s Sun Pharmaceuticals, which is among the top five generic companies worldwide.

The battle lines between generics and Big Pharma are no longer as sharply drawn as they were some decades ago, even if the latter still claim the high ground by calling themselves innovator companies who produce original drugs through costly research and development (R&D).

Big Pharma does produce original drugs, but their blockbuster formulations have, to a large extent, come through costly acquisitions of small companies which made the breakthroughs. Or they have succeeded by partnering with public laboratories and then patenting the result.

For instance, AbbVie’s blockbuster arthritis drug Humira was the result of an acquisition of Knoll Pharmaceuticals, the drug-making business of German chemicals company basf, by AbbVie’s parent company Abbott in 2000. That drug has raked in over $200 billion for AbbVie.

More recently, Pfizer’s huge success with its COVID-19 vaccine came about after it partnered with a small German startup, BioNTech, which specialised in mrna immunotherapy research and had used the results to put together a vaccine to combat the deadly new SARS-CoV-2 virus. Pfizer made money hand over fist by developing and marketing this vaccine, Comirnaty, which is said to be the fastest-selling drug in pharma history. It accounted for most of Pfizer’s sales of $72 billion in 2021.

Generic firms have learned quickly that the Big Pharma way to heft and profit is worth emulating. Merger and acquisition deals are now as common in the generics sector as in the field of Big Pharma.

Admittedly, it’s the only way to grow in the current capitalist system. But in other ways, too, generics have shown an equal aptitude in absorbing the lessons of the market — in business practices. Since 2012, generic companies operating in the US have been engaged in various corrupt practices and price-fixing, according to lawsuits filed in the Connecticut District Court by 44 states of the United States against 20 generic companies. Seven of these are among India’s top manufacturers.

The lawsuit filed in May 2019 puts Teva at the centre of the alleged conspiracies to fix the prices of generics and also names certain executives of the generic companies as defendants. It says generic drug manufacturers, “through their senior leadership and marketing, sales and pricing exploited their interactions at various and frequent industry trade shows, customer conferences and other similar events, to develop relationships and sow the seeds for their illegal agreements. These anti-competitive agreements are further refined and coordinated at regular ‘industry dinners,’ ‘girls' nights out,’ lunches, parties, golf outings, frequent telephone calls, e-mails and text messages”.

The seven firms named in the lawsuit are Aurobindo Pharma, Dr Reddy's Laboratories, Glenmark Pharmaceuticals, Lupin, Wockhardt, Zydus Pharma and Taro Pharmaceutical Industries, which is a subsidiary of Sun Pharma, India's largest pharmaceutical company.

The case goes back to 2016, when the generics were first sued. The 2019 case is the second such suit. A Sun Pharma spokesperson had said at the time that the charges were baseless and that it “will continue to vigorously defend against them.” It appears, however, to have thrown in the towel, with reports in March saying it has opted to settle.

Fierce Pharma, a website that tracks developments in the US pharma industry, reported recently that the Mumbai-based Sun Pharma and Taro have agreed to settle for $75 million to end the long-running antitrust litigation. Quoting court documents, the website said that in addition to the upfront sum, there could be a payout of another $20 million.

Earlier, there were reports that Sandoz had struck a $195 million settlement deal, although it “disagrees with the extremely broad claims” brought in the lawsuit. Some other generics firms also appear to have settled, but Sun Pharma is the first Indian company to seek a settlement. 

One reason could be that the plaintiff states have kept up the pressure by filing a third suit in 2020 related to price-fixing on a different set of medicines and involving more companies. Included in these, though, are many of the same Indian firms.

The 2019 lawsuit that accused generic companies of an overarching conspiracy says the illegal agreements had raised prices, “maintained artificially inflated prices, thwarted Congress's goal to lower the prices of drugs, and thus frustrated the potential of the industry to deliver great value” to consumers. There is a supreme irony here. 

As much as these accusations against generics firms may be valid, couldn’t the same charges be levied against innovator pharma companies?

How is it all right for an AbbVie or a Pfizer or a Novartis to make billions of dollars of profits on a single drug? Where is the issue of delivering value to customers in their case? Has Congress not been striving for years now to bring Big Pharma to book? The only difference is that Big Pharma has patents — and the clout on Capitol Hill — which gives them the freedom to indulge in price gouging. Surely the application of anti-trust laws should not be deterred by patents? 

The lawsuit points out that generic drugs can save (and have saved) consumers, other purchasers of drugs and taxpayers tens of billions of dollars annually because these are a lower-priced alternative. Indeed, they are. But if the governments of the 44 states do not understand that they would be saving multiples of the same sum by curbing the outright profiteering by Big Pharma, then the lawsuit sounds short-sighted and biased, if not downright hypocritical.

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