The Attorney General of Connecticut minced no words when he said that his office “has developed compelling evidence of collusion and anticompetitive conduct across many companies that manufacture and market generic drugs in the United States.” He went on to state:
“…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.”
The FDA and Generic Drugs:
The Food and Drug Administration loves generic drugs. These copycat medications are supposed to save consumers huge amounts of money without any downsides.
The FDA proclaims that:
“When it comes to price, there is a big difference between generic and brand name drugs. On average, the cost of a generic drug is 80 to 85 percent lower than the brand name product. In 2010 alone, the use of FDA-approved generics saved $158 billion, an average of $3 billion every week.”
The High Prices for Generic Drugs:
Despite FDA’s enthusiasm for the savings generic drugs offer, there have been alarming increases in the prices of some generics. Two years ago, an article in The New England Journal of Medicine (Nov. 13, 2014) documented a 2,800 percent increase in the price of the generic blood pressure pill captopril.
Doxycycline, an antibiotic that has been around for 50 years, is used to treat respiratory tract and urinary tract infections as well as several tick-borne infections, including Lyme disease and Rocky Mountain spotted fever. From 2012 to 2013, the price rose from 6.3 cents to $3.36 per pill, a 5,000 percent boost.
The reason for such extreme price increases seemed mysterious. All of the costs for developing these drugs were paid off long ago, and generic drug firms spent very little money on marketing. It appeared that some drug firms raised their prices just because they could.
Was There Collusion?
There have been suspicions that some of the generic drug manufacturers have been colluding to push prices up. The Senate Subcommittee on Primary Health and Aging held hearings in 2014. The Antitrust Division of the Justice Department has also been hunting down evidence on possible antitrust violations.
Now, the attorneys general of twenty states have joined forces to file charges against a group of generic drug companies. The accusation is of conspiring to manipulate prices on doxycycline and the diabetes drug glyburide.
The official complaint alleges that some of the executives from major generic makers met over dinner on several occasions and traded information on business strategies. It wasn’t only the male executives who were involved. There have been allegations that there were “girls nights out” get-togethers where inside information was shared. And there were “lunches, parties, and numerous and frequent telephone calls, emails and text message.” The outcome appears to have been that competition was suppressed and high prices for generic drugs facilitated. Of course not all generic drugs were involved in this mess. But even one is one too many.
The free market system is based on true competition. That is why antitrust officials are looking into “unlawful agreements to fix prices and allocate consumers.” A dozen generic drug companies, including some of the largest, may be involved and over two dozen different drugs could be affected.
The COMPLAINT from 20 attorneys general notes:
“Generic drug manufacturers argued publicly that the significant price increases [for generic drugs] were due to a myriad of benign factors, such as industry consolidation, FDA-mandated plant closures, or elimination of unprofitable generic drug product lines. What the Plaintiff States have found through their investigation, however, is that the reason underlying many of these price increases is much more straightforward, and sinister – collusion among generic drug competitors.”
The COMPLAINT goes on to note:
“This anticompetitive conduct — schemes to fix and maintain prices, allocate markets and otherwise thwart competition – has caused a significant, lasting and ultimately harmful rippling effect in the United States healthcare system, which is still ongoing today. Moreover, many of these schemes were conceived and directed by executives at the highest levels of many of the Defendant companies.”
Generic Drugs and Quality Control
The generic drug industry was already in hot water because of quality control problems, especially at a number of foreign manufacturing plants. Sloppy manufacturing practices and outright fraud have been far too frequent.
All these problems undermine public confidence in generic drugs. People rely on such medications to treat life-threatening conditions. Generic drugs make up 88% of all dispensed drugs in the United States. Chances are good that if you take any prescription medicines at least some will be generic. Insurance companies demand that patients purchase generics, regardless of where they are made. Brand name products are priced into the stratosphere.
Readers Share Their Perspective:
“Healthy Lady” in Southern California describes the price differential between brand and generic drugs:
“I cannot tolerate generic Prozac (fluoxetine) by the four companies I tried. It simply does not work.
“The price for brand name is $966.85 for a 90-day supply. The generic cost, even increased, is under $50. We need some oversight on these costs.”
Lyn in Waxhaw, NC writes:
“Not long ago I was paying about $5 or $10 for a 60gm tube of Desonide (used for dermatitis). I was shocked when it went from about $10 to over $300 in one year!”
Barry in Mansfield, TX shares the pain from a veterinarian’s perspective:
“I think the escalating costs of drugs is a huge problem in the US. Many people will have to forgo their medications and their health will surely suffer. I do believe the drug companies are gouging the public.
“On a similar note, I am a practicing veterinarian. We too use doxycycline and many other of the same drugs used for humans. The increased costs have made many of these drugs too costly and many pets are being euthanized as a result. I could give you dozens of examples. Something has to be done.”
Trish writes about high prices for generic drugs for senior citizens:
“The generic drug replacement for Corgard (nadolol), a beta blocker, went from $30 a month to over $800 in recent years. I took Corgard for over 20 years but had to give it up because of the cost. I am hoping that this sanctioned robbing of older people will be stopped.”
It could take years before the generic industry recovers from these scandals. In the meantime, consumers who need reasonably priced drugs are suffering. Our Guide to Saving Money on Medicines details these controversies and offers some alternatives (online at PeoplesPharmacy.com).