Drug Price Fixing…The Details

A massive price-rigging scheme that drove up drug manufacturer profits by inflating drug prices has been exposed in a lawsuit filed earlier this month by 44 states.

Rather than compete in an open market, manufacturers including Teva, Pfizer, Novartis and Mylan conspired to split up market areas, allowing them to increase prices for more than 100 generic drugs by up to 1000%.

Are you angry yet?

NYTimes:

“A key element of the scheme, the complaint alleges, was an agreement among competitors to cooperate on pricing so each company could maintain a “fair share” of the generic drug markets. At the same time, the companies colluded to raise prices on as many drugs as possible, according to the complaint.”

The Times’ piece added:

“Rather than enter a particular generic drug market by competing on price in order to gain market share,” the complaint states, “competitors in the generic drug industry would systematically and routinely communicate with one another directly, divvy up customers to create an artificial equilibrium in the market, and then maintain anticompetitively high prices.” [emphasis added]

I asked Jim Andrews, RPh, for his thoughts on the suit; here’s the first part of our discussion. [Jim has been working in retail pharmacy and PBM for decades and understands this stuff as well as anyone]

MCM – In your view is the suit filed on solid ground?

Jim – Yes, it is obvious from the volume of materials collected, referenced and cited – that this investigation has been going on for multiple years. I think the sheer volume is indicative of the seriousness of the lawsuit. Many areas of the lawsuit that I found were redacted so I assume they are the most damning.

MCM – What were some of the key claims made by the plaintiffs that caught your attention?

Jim – Hyperinflation of common generic drugs, especially after 2012. Fair share territories maintained between competing generic manufacturers that preserved current drug pricing and prevented price declines. Collusion between competing generic drug companies in the form of sharing confidential information on drugs, pricing, customers and strategies.

MCM – It appears that the alleged behavior has been going on for some time – do you think this type of behavior has occurred before?

Jim – I assume that this had been going on prior to the 2012 time frame referenced in the lawsuit but the 2013/2014 hyperinflation indicates a period of increased strategic cooperation.

What does this mean for you?

The alleged criminal behavior cost consumers – and some payers – millions. 

By Joe Paduda

Courtesy of Managed Care Matters

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