Mumbai, Feb. 19: Ranbaxy Laboratories and Teva Pharmaceutical Industries have agreed to settle claims that they came together to unlawfully restrict competition in the US generic drugs market.
According to a settlement reached with the New York attorney-general, both the companies will pay $300,000. They will also terminate an agreement entered four years ago not to challenge each other’s rights to sell certain generic drugs in the US market.
The US, which is the world’s largest pharmaceutical market, has also been encouraging generic drugs (off-patented drugs) to provide affordable medicines to its people. Attracted by the huge potential, scores of Indian companies are now selling generic drugs in this market.
A company is entitled to a 180-day marketing exclusivity if it is the first to file an application for a generic version of a particular drug. However, this exclusivity can be challenged by rivals by approaching the US Food and Drug Administration (USDFA) or in court.
Ranbaxy and Israel-based Teva entered into an agreement in 2010 to refrain from bringing these challenges. It came after Ranbaxy was worried that it may not receive an approval from the USFDA on time to make the generic version of Pfizer’s Lipitor. It is, therefore, alleged to have reached a profit sharing deal with Teva that would have allowed the latter to sell the drug if did not secure the approval in time.
It is also understood to have included an arrangement that in the event, it does win the approval, Teva will not challenge the same.
Though Ranbaxy won the approval, the arrangement that both will not challenge each other’s right to marketing exclusivity is believed to have remained in place.
“Agreements between drug manufacturers to protect each other’s market positions violate principles of antitrust law, and can lead to higher drug prices,” New York attorney-general Eric Schneiderman said in a statement. Such pacts, he added, went against the interest of consumers since generic drug prices are lower when more than one player enters the market.
The two firms neither admitted nor denied the allegations, as part of the settlement. They also agreed to refrain from entering into similar agreements in the future.
Ranbaxy, did not immediately offer any comments on the recent development.
Though the Ranbaxy scrip rallied on the bourses as investors felt it will not make any material impact on the company, analysts caution that the development has the potential of hitting its future launches since a rival can now challenge the marketing exclusivity.