Pharma stocks trade lower after US Congress begins investigation into price hikes of 10 select generic drugs involving 14 generic players - including Sun Pharma , Dr Reddy's and Cadila . CNBC-TV18 spoke to Vikas Dandekar, India Bureau Chief, PharmAsia News.Com to analyse the impact of the move on pharma companies and stocks.
According to Dandekar, the scale of investigation by the US Congress is unprecedented and so 10 drugs and 14 generic companies as of now looks like a representative figure. But going ahead it might just expand and then may encompass a larger number of players, he adds.
Below is verbatim transcript of the interview:
Q: In how much trouble are these three Indian pharmaceutical companies right now?
A: This is something that is unprecedented. Such a scale of investigation is something that I haven't seen Congress doing. So these 10 drugs and the 14 generic companies as of now looks like a representative figure but it might just expand and then it may encompass a larger number of players.
Q: We are walking into a political arena here as well. The US elections are coming up, health and health cost is a big issue in the US. So how big can this get?
A: Actually this has been in the making. For the last one year I have been seeing stray reports talking about such huge increases. Somebody mentioned about tetracycline a couple of months ago. In fact this has gone completely against what it should have been in terms of pricing actually going down because if the prices are high newer players are supposed to come into their places and reduce prices which has not happened.
Q: Are you making the point that the Congress might have some justification into looking at these price hikes because they are not necessarily explained in all circumstances?
A: Yes, there are some external factors as well. For instance, the distributors have actually consolidated big time in the last two years which should have given them the higher purchasing power which means the pressure on generic companies that have actually not happened.
There was a big lag in constraints in terms of supplies. Companies have actually gone into some more profitable products, some couldn't supply because of manufacturing issues.
If the foreign direct investments (FDIs) at all are doing any priority reviews to fill up those gaps and a couple of years ago we had the same kind of issue with injectible shortage and therefore, it looks like a replay of that and the price increases have been because of that substantially.
Q: I am looking at the press release put out by the senator and US Congressman involved in this and they have mentioned some of the drugs. For instance Doxycycline Hyclate they said cost USD 20 last October for a bottle of 500 tablets, by April the price was USD 1,849. So these are big moves in price and I am sure they would have benefited the bottom lines of all the companies involved in the manufacture of this. Any punitive action will be a substantial dent?
A: We haven't seen anything of this sort happening before. It has actually caught the attention now. We don't know if there is any kind of an FPC plug there because whenever mergers or acquisitions happen, they ask companies to divest and reduce the competitive pressure on others. So this is just the beginning, I am sure this will yield some more hot air.
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