South Carolina Attorney General Alan Wilson joined 43 other state attorneys general in a federal civil suit alleging a major conspiracy by drug manufacturers to set prices and suppress competition for generic drugs. The states rightly are seeking compensation for losses and damages.
If proved, this alleged conspiracy would rank among the biggest and most morally reprehensible scams in the nation’s history. Large price increases in these supposedly cheap drugs over the past seven years have already cost consumers and federal and state taxpayers billions of dollars. The suit against the pharmaceutical companies is led by Connecticut Attorney General William Tong.
Generics are supposed to be less expensive than patented drugs for two common-sense reasons: The manufacturer avoids the costs incurred by the original patent holder to develop the drug and bring it to market, and competition between manufacturers is supposed to keep prices low.
But in reality generics sometimes end up costing almost as much as or even more than the patented drugs they replace. Generics manufacturers have found a number of ways to make a killing, according to the suit, mainly by agreeing not to compete.
Stories abound about huge drug price increases from 2012-15. The New England Journal of Medicine reported in 2014 that in the preceding two years a generic drug used to treat high blood pressure and heart failure had increased from 1 cent a pill to 40 cents, and that the price of a generic antibiotic increased from 6 cents a pill to $3.36, a jump of 5,600 percent.
These are not isolated cases. The complaint filed Friday by the 44 state attorneys general cited a study finding that in just one year, between July 2013 and July 2014, the prices of more than 1,200 generic medications increased by an average of 448 percent.
According to the complaint, around the time of those price increases the named defendant drug companies and officials representing them created a covert agreement to share the market between them according to a set of agreed rules, to communicate about pricing and customers, and to refrain from undercutting rivals by offering drugs at a lower price.
The complaint names 20 generic drug manufacturers, including such prominent companies as Pfizer, Sandoz, Mylan and Teva.
The focus of the investigation preceding the suit was on alleged networks of conspirators centered on Teva. According to the lawsuit, industry executives frequently met during social events and also exchanged communications about “fair share,” “playing nice in the sandbox” and how to be a “responsible competitor” in the industry.
Attorney General Wilson accurately called the alleged plot “unconscionable” because people must rely on the drugs, “in some cases for their lives.”
Attorney General Tong of Connecticut stated, “We have emails, text messages, telephone records and former company insiders that we believe will prove a multiyear conspiracy to fix prices and divide market share for huge numbers of generic drugs” in a “multibillion-dollar fraud on the American people.”
If the attorneys general can prove their case, such a conspiracy should draw harsh penalties.