Outrage of the Month: Generic Drugmakers Allegedly Engaged in Massive Price-Fixing Scheme

Health Letter, July 2019

By Michael Carome, M.D.

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Since 1984, when Congress passed the Hatch-Waxman Act, which promoted prescription drug price competition by encouraging companies to manufacture generic drugs, the U.S. generic drug market has flourished. In 2017, nine out of every 10 prescriptions dispensed in this country were generic.[1]

As a result, patients and the health care system are saving hundreds of billions of dollars annually on prescription drugs. But allegations made in a recent lawsuit filed in federal court suggest that the savings over the past several years should have been billions of dollars more.

On May 12, Connecticut Attorney General William Tong announced that 43 states and Puerto Rico were suing 20 generic drug manufacturers for conspiracies to artificially inflate and manipulate prices and reduce competition for more than 100 commonly used generic drugs. The companies named in the suit include Teva, Sandoz, Mylan and Pfizer, as well as 15 senior company executives. According to the lawsuit, by 2012 “Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the United States.”

The lawsuit described “pervasive and industry-wide” conspiracies involving two types of illegal anticompetitive conduct. First, to avoid competing with one another and thus reducing prices for a wide range of generic drugs, the defendants communicated with one another and agreed on how much market share and which customers each competing company was entitled to. Second, the competing companies in a particular market agreed to collectively raise or maintain prices on a particular generic drug. In some cases, the coordinated price increases exceeded 1,000%.

The medications targeted in the alleged price-fixing scheme included cholesterol-lowering statins, angiotensin-converting enzyme inhibitors and beta blockers for treating hypertension and heart disease, antibiotics, antidepressants, contraceptives, and nonsteroidal anti-inflammatory drugs. The lawsuit alleges that the conspiracies resulted in “many billions of dollars of overcharges” to the states and others and had a “significant negative impact on our national health and economy.”

Commenting on the lawsuit, Attorney General Tong said, “We have hard evidence that shows the generic drug industry perpetrated a multi-billion dollar fraud on the American people… We all wonder why our healthcare, and specifically the prices for generic prescription drugs, are so expensive in this country — this is a big reason why.”

For many patients, recent spikes in generic drug prices have caused financial hardships as out-of-pocket expenses due to copays and deductibles rose. For others, previously affordable medications have become unaffordable, leading patients to forgo lifesaving treatments. Therefore, it is imperative that the perpetrators of illegal price-gouging schemes, such as those alleged in the 44-state lawsuit against the generic industry, be held accountable.


References

[1] Association for Accessible Medicines. 2018 Generic Drug Access & Savings in the U.S. Access in Jeopardy. https://accessiblemeds.org/sites/default/files/2018_aam_generic_drug_access_and_savings_report.pdf. Accessed May 31, 2019.