Earlier today, 20 states joined together to file a civil lawsuit against six major pharmaceutical companies in the American market. The lawsuit, filed in Connecticut’s U.S. District Court, claims the six companies conspired to illegally influence the prices of a common antibiotic and a diabetes drug by working out shady deals at the expense of their consumers.
The six companies allegedly agreed with one another to benefit from increased prices and thus increased sales. They also allegedly split the market share in the United States to insure that the prices would be fixed, using deceptive business tactics that benefitted all parties. Worst of all, the offending drug companies deleted any communications (including emails) that would lead to any evidence of their collusion.
Who are these companies that allegedly fixed the prices of their generic drugs, and how is it affecting their stock prices? Let’s take a look.
Mylan, makers of the EpiPen, was the most notable company named in the lawsuit.
Mylan is currently under fire for inflating the price of the EpiPen, the automatic injector commonly used to treat anaphylactic shock. In the wake of the price-fixing allegations, the company’s stock is down .40%. Mylan outright denied their role in the price fixing.
Teva Pharmaceutical, an Israeli pharmaceutical company listed on the New York Stock Exchange.
Teva specializes in selling generic drugs on the U.S. market. The company has yet to make a statement on the allegations, but their stock is currently down by .41%.
Heritage, a division of the India-based Emcure Pharmaceuticals, was the alleged “ringleader” of the price-fixing scheme.
In a statement, Heritage acknowledged that executives who are no longer with the company were responsible for the scheme. The company and co-conspirator Citron Pharma LLC are private companies, and thus have no publicly traded stock that can be impacted by such allegations.
Mayne Pharma and Aurobindo Pharma, both publicly traded companies, were also involved in the scheme. Both stocks are down today by 1.72% and 1.19%, respectively.
What will become of these companies if they are proven to have fixed drug prices? If it can be proven in a court of law that Mylan, Teva, and the other four companies fixed prescription drug prices, then the companies will likely pay steep penalties, fall under increased regulatory scrutiny, and fire the offending executives (should they still be employed). Paying high monetary penalties would likely further decrease the company’s stocks, as it would cut into their bottom line. This is, after all, the price a company must pay for skirting the law and effectively stealing from their consumers.