Generic drugs cost so much because the prices are fixed and there is a widespread conspiracy to rig the market. Connecticut and 40 states have now filed a 500-page lawsuit accusing the biggest generic drug makers of bilking their consumers out of billions of dollars
“The generic drug industry is the largest private sector corporate cartel in history.” - William Tong, Connecticut Attorney General
In 1984, Congress established the generic drug industry to push drug prices down. The idea was that once patents on brand name drugs expired, generic makers would compete, and in turn, make drugs more affordable.
Ninety percent of prescribed drugs are generic. Yet, for some reason, many of the most prescribed drugs jumped 400% in a single year. Tong himself takes doxycycline, which shot up 8281% between 2013 and 2014, from $20 to more than $1,800.
Years in the Proving
Generic drug makers claim market forces have caused the increases. However, Joe Cole, the head of the antitrust division of the Connecticut Attorney General’s office and lead prosecutor, Joe Nielson, there is irrefutable proof that there was conspiracy.
Nielson spent two years digging, and he noted that right before a spike in prices among the major competing producers, there was a flurry of calls between them. Competitor A talking to competitor B and C five times on one day. Then, in lockstep, they all jacked the prices at the same time, and for the same amount.
The investigator matched phone logs to thousands of text messages from Heritage Pharmaceuticals. This exchange with competitor Citron Pharma, proved collusion to increase price of a diabetes medication.
The records were subpoenaed, and here are some of the communications that will be offered in evidence:
Heritage: “We are raising the price right now - just letting you know, Teva says they will follow. Aurobindo agrees too.”
Citron: “…we are definitely in to raise pricing…are doing this immediately.”
Heritage answered: “We are raising our customers 200% over current market price.”
Many More Examples
The investigation also implicated Aurobindo and Teva, the world’s largest generic drug maker. Combing through “consequential” calls back and forth between competing generic makers yielded many more incriminating elements of collusion. For example, more long phone discussions between Heritage and Teva and Sun before Nystatin jumped from $68, the price it had been for years, to $131, and then Heritage jacked it to $141.
Pfizer and Teva
Pfizer, operating through Greenstone, its wholly owned subsidiary and alter ego, entered into agreements with Teva and other competitors to allocate and divide customers and markets and to raise and fix prices. This is from an email from Teva to Greenstone: “Greenstone, we are playing nice in the sandbox and will let them have the customer.”
Translation: Avoid competing with each other, take your fair share and don’t go for any more than that. Keep the prices as high as you can.
It is Devastating
When asked what the effect this has on you and me, the average consumer, Tong said, “It is devastating. It affects health insurance premiums and health insurance plans. It impacts Medicare and Medicaid, and it is a chain reaction that drives up the price of American healthcare to unnatural heights.”
Too Big to Care
Tong said that they know it is illegal, and it is not that they are too big to fail. They are too big to care. There is just too much money to be made.
Connecticut’s Attorney General is going after them with all the weapons he has. He wants to make them pay for the billions of dollars that they have cost Connecticut’s citizens. He says that they are going to be joined by other states and plaintiffs as time passes, as this is being done in stages, targeting the biggest players first, and then going after the lower profile, equally culpable criminal manufacturers.
One Can Only Hope
Somehow, Americans associate pharmaceutical companies with health, and think they are part of healthcare. If they were ethical, and they were doing as they should, they would indeed be heroes for making drugs that help, but they are not.
These corporate entities are in it to make all the money they possibly can, and in this case, they were not satisfied with their normal profit margin (which was extremely high in the first place). They are only satisfied if they can fleece us for what the market will bear, and under the law, Medicare has to pay what they bill.
Corrupt History of How it Got This Way
At one time, Medicare lacked a prescription-drug benefit. It was not until 2003, under President George W. Bush, that Congress added the Part D benefit, through which Medicare pays for seniors’ prescription drugs. The signing of the law followed a controversial roll call vote in the House of Representatives, which Republicans held open for several hours as party leadership maneuvered to secure enough votes for passage.
One bargaining chip to attract market-oriented Republican votes was the so-called “noninterference clause” (a provision the drug manufacturers played a major role in writing and getting through Congress) which banned negotiations between Medicare and pharmaceutical companies on drug prices. It prevented the government from developing its own formulary or pricing structure. America is the only country in the world with such a restricted provision written into the law.
Rep. Billy Tauzin, Arch Criminal
Leading the charge on behalf of the drug manufacturers in 2003 was then-Rep. Billy Tauzin (R-La.), who co-authored the modernization legislation while he was negotiating behind the scenes to become the head of the Pharmaceutical Research and Manufacturers of America – the drug industry’s main lobbying group. He left Congress in 2004 to head the PRMA at a salary of $2 million per year.
Part D was progress, for it added many needed insurance provisions and coverage for deserving Americans. But by most accounts, it was not enough. Conspicuously absent from President Obama’s signature healthcare reform was any effort directed at reducing the prices Medicare pays for drugs. He broke his promise to change this law during negotiations. This was a major political betrayal to Americans, and they didn’t have a clue.
How Much Did This Cost Americans?
Trying to estimate how much the American people have been robbed since this began is impossible. A drug that should cost the customer $20 (and only cost pennies to make), but was increased in price to thousands of dollars, has garnered the companies and stockholders unimaginable riches.
After seeing the results of such lawsuits on other pharmaceutical companies, it is likely that they will eventually negotiate a settlement that will be written off as just the cost of doing business.
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