A major lawsuit accuses generic drug makers of a price-fixing conspiracy and “billions of dollars of damage” to the US economy.

A new lawsuit, joined by 43 states, was filed May 10 in the U.S. District Court in Connecticut. According to Connecticut’s Attorney General William Tong, appearing on CBS’ 60 Minutes, dramatic price increases for some of the industry’s most common drugs between 2013 and 2014 were the result of a massive price-fixing scheme involving some 20 drug makers, including the world’s largest generic drug maker, Teva Pharmaceuticals.

The price increases hit patients with high-deductible corporate insurance plans particularly hard, according to consumer advocates.

As Scripta has often noted between 2010 and 2015, more than 300 generic drugs had at least one price increase of 100% or more. This lawsuit serves as proof once again that generics now require as much (if not more) vigilance from payers as do brand-name drugs. Indeed, payers and patients have long been at the mercy of drug makers, drug wholesalers and, yes, quite possibly your PBM.

Generic substitution is just one step towards a comprehensive pharmacy benefit savings plan. Contact one of Scripta’s savings experts to learn how to protect your company and your employees from price manipulation.

GENERIC DRUG MAKERS: “TOO BIG TO CARE.”
As one might imagine, the market for generic drugs is massive. According to recent research, patients around the world spent over $200 billion on generic drugs in 2015, a market that is expected to reach $380 billion by 2021. In the US alone that market is $100 billion, and the market for generics have grown from less than 20% of total prescriptions to upwards of 90% of prescriptions filled.

Attorney General Tong, during his turn on 60 Minutes, laid out a strong case for collusion in carving up that market. With access to phone records and text messages, his office uncovered a “massive systematic conspiracy to bilk customers out of billions of dollars.” As a result, more than 1200 of the most-prescribed drugs jumped on average 400% in a single year.

According to antitrust investigators, if proven the drug makers’ collusion may constitute one of “the most egregious examples of corporate greed” ever seen. The industry and defendants including Pfizer, whose wholly-owned subsidiary Greenstone, LLC is named in the suit, “vehemently” deny the accusations and will “vigorously” contest the lawsuit.

WHAT DOES COLLUSION LOOK LIKE?
So how did drug makers manufacture the price increases?

Congress established the current generic industry in 1984 to push prices down and foster competition. But according to the lawsuit, sales directors, marketers, and CEO’s alike (and as far back as 1986) participated in a complex price-fixing scheme by “playing nice in the sandbox together.”

Writing in the Hartford Courant, Josh Kovner offers an example: Pravastin, a cholesterol-lowering medication, made $1.3 million under the brand name Pravachol for Bristol Myers Squibb in the year before it came off patent protection and entered the generic market in 2006.

Kovner explains what happened next: “Five companies produced the generic version — Teva, Glenmark, Zydus, Lupin and Apotex… Up until the spring of 2013, a bottle of 10 mg Pravastatin tablets was selling for about $27…. by the end of August 2013, all five companies had raised their prices and had agreed not to undercut one another, even to the point of refusing to offer lower prices when wholesalers came seeking relief… Once the fifth company locked in at the high price, Pravastatin was selling for about $196 per bottle, according to the lawsuit.

“The lawsuit says that the net profits for Teva from the manipulation surpassed $653 million — per quarter.”

PRICE-FIXING AFFECTS ALL OF US
Generic drug prices spiked between 2013 and 2015, and even though they have remained stable ever since, that inflationary moment has affected health insurance premiums and impacted Medicare and Medicaid, driving up the cost of American healthcare.

Mr. Tong noted two additional examples among the 1215 drugs that saw price increases during this period: Doxacyclene, a common antibiotic, the price of which rose 8281% fro $20 to more than $1800 between 2013 and 2014. Nystatin cost just $68 a bottle for years until April 2013, when it doubled in price, with Heritage Pharmaceuticals leading the way for Sun and Teva.

As Ted Doolittle, the state health advocate and a former federal prosecutor, put it, speaking again with the Hartford Courant, “Moving people toward generics had been somewhat effective” in combating the rising cost of health care. “The victims of this fraud,” he says, “are our families, our loved ones, our neighbors.”

Generic substitution is just one step towards a comprehensive pharmacy benefit savings plan. Contact one of Scripta’s savings experts to learn how to protect your company and your employees from price manipulation.

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