Generic drugs are supposed to save Americans big bucks. The FDA proudly proclaims that generic drug approvals by the agency save more than ten billion dollars annually. While there is no doubt that most generic drugs cost far less than their brand name counterparts, some are surprisingly pricey. Several years ago we started wondering if some generic drug companies cheated by fixing prices? The Justice Department seems to think so.
In recent years a number of prominent generic drug makers have reached legal settlements for price fixing. The most recent company to face charges from the Department of Justice (DOJ) is one of the world’s largest generic drug manufacturers, Teva Pharmaceuticals. By the way, this Israeli drug company is pronounced Teh-Vah, not Tee-Vah.
How Long Have Generic Drug Companies Cheated?
The antitrust division of the DOJ has been investigating generic drug manufacturers for years. In November, 2017 we wrote this article:
Are Generic Drug Makers Guilty of Collusion?
Attorneys general from a majority of states are suing a number of generic drug makers for collusion with respect to prices.
At that time 45 attorneys general stated that 18 generic drug companies were colluding rather than competing. The Attorney General of Connecticut stated:
“…we have evidence of widespread participation in illegal conspiracies across the generic drug industry. Ultimately, it was consumers – and, indeed, our healthcare system as a whole – who paid for these actions through artificially high prices for generic drugs.”
Teva USA Charged with Fixing Prices:
The prosecutors allege Teva participated in three different conspiracies of generic pharmaceutical firms, costing consumers at least $350 million dollars. It wasn’t just price-fixing. The feds have accused the company of rigging bids and allocating customers. What does it mean to allocate customers?
On December 15, 2016, the Wall Street Journal reported that:
“The complaint filed Thursday alleges that drug-manufacturer executives colluded on a variety of occasions, including at so-called ‘industry dinners.’ It cites one such dinner in January 2014 that allegedly involved 13 male executives, including one from Aurobindo, who gathered at a steakhouse in Bridgewater, N.J.
“Female generic pharmaceutical sales representatives, meanwhile, had their own opportunities for collusion, the complaint says. At ‘Girls Night Out’ or ‘Women in the Industry’ meetings and dinners, they would huddle with competitors and ‘discuss competitively sensitive information.’
“During those sorts of gatherings, attendees would gain access to each other’s business strategies, which ‘often leads to agreements among competitors to allocate a given market so as to avoid competing with one another on price,’ according to the complaint.”
What Ever Happened to Capitalism?
Drug companies are not supposed to collude. They are supposed to compete. That is the heart of capitalism. We have an antitrust division in the Department of Justice to prevent price fixing. And lest you think this doesn’t affect you, drug prices have a huge impact on your insurance premiums. In addition, Medicare and Medicaid spend your money paying for medicines. If generic drug companies cheated, you are paying for such misdeeds.
Is this all a big hoax? We doubt it. Five of seven drug companies have reached settlements with the DOJ. Instead of fighting the feds, these companies have rolled over.
Take Taro Pharmaceutical Industries as an example. According to Fierce Pharma, an industry monitoring organization, Taro has agreed to pay $419 million to:
“…settle claims it engaged in an industrywide scheme to fix the price of a range of generic medicines.
“In a statement, Taro CEO Uday Baldota said the drugmaker was ‘happy’ with the deals and pledged to ‘fully cooperate’ in the government’s probe.”
(Fierce Pharma, July 24, 2020)
Another generic drug company, Apotex, has agreed to pay over $24 million for fixing the price of the cholesterol-lowering drug pravastatin. Teva is also in trouble for the same drug as well as many others.
According to the Wall Street Journal (Aug. 25, 2020):
“Prosecutors accused the company of fixing prices, rigging bids and allocating customers in three different conspiracies, including for pravastatin, a commonly prescribed cholesterol drug, whose brand name is Pravachol. A second conspiracy involved price fixing on medications used to treat arthritis, seizures, pain, skin conditions, and blood clots, the Justice Department alleged. The third alleged conspiracy involved drugs used to treat brain cancer, cystic fibrosis, arthritis, and hypertension, the department said.”
This follows charges from the Justice Department that Teva overcharged Medicare for Copaxone, a medicine prescribed for multiple sclerosis.
In light of the DOJ’s charges, you may find Teva’s mission statement of interest:
“At Teva, we strive to deliver quality medicines to patients around the world with integrity and ethical business practices.
“What we do is important, but how we do it is just as important. Every decision we make and every action we take should reflect our collective values and culture. Our values define who we are. They express what we collectively believe in, they represent the best in us, and they guide us in all we do.
“We will not waver in our commitment to do what is right, while striving to reach our financial and business goals. No objective is worth compromising our values or ethical standards. Our values are universal across every role, every business unit and throughout all of our locations around the world.”
How Long Have Generic Drug Companies Cheated Americans?
The DOJ claims that the price-fixing conspiracies may go back to the spring of 2013. That means a lot of your money has gone into the coffers of major generic drug manufacturers. We have been concerned about generic drug quality for many years. That is largely because there have been so many scandals about poor quality that we have lost count. Now, add price fixing to the quality control problems and you have double jeopardy.
If you would like to learn more about generic drug misadventures, you may want to listen to these free podcasts. Just click on the arrow inside the green circle under the photos of our guests.
Show 1131: Was Your Medicine Made in China?
In the last 20 years, pharmaceutical manufacturing has shifted to other countries from the US. Find out what difference it could make if your medicine was made in China.
Then there is the powerful research by Katherine Eban. We started her on this generic drug investigation. You may find our interview with her enlightening:
Show 1169: What Are the Problems with Generic Drugs?
When investigative journalist Katherine Eban took a close look at medicine manufacturing, she uncovered many frightening problems with generic drugs.
What Do You Think?
Are you angry that many generic drug companies cheated?
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