Insight, analysis & opinion from Joe Paduda

< Back to Home

May
30

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. 

Tomorrow – what this means for workers’ comp.


2 thoughts on “Drug price fixing…the details”

  1. It is amazing that the PBMs with all their data did not notice this trend and point it out to regulators. Its is hardly a surprise to anyone with knowledge of the industry. Its is not much different then paying off generic manufactures to delay production of new generics which has been common knowledge for years.

    1. Hello Jgaines – you’re making an assumption that PBMs didn’t raise the alarm. It’s not clear from the document how the issue initially came to the AGs’ attention.

Comments are closed.

Joe Paduda is the principal of Health Strategy Associates

SUBSCRIBE BY EMAIL


 

SEARCH THIS SITE

A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

DISCLAIMER

© Joe Paduda 2019. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.

ARCHIVES

Archives