Drug Makers Pay Off Generic Rivals to Keep Prescription Prices High

Big Pharma’s shady secret.

Just about anyone who has ever filled a prescription knows how much cheaper it is to opt for a generic alternative to an expensive brand-name medication. What is probably less known is that large pharmaceutical companies are doing everything in their power to make sure consumers don’t have that option.

Last week the Federal Trade Commission issued its annual tally of so-called “pay-for-delay” deals, which refers to a shady little quid pro quo whereby major pharmaceutical companies with expiring patents pay smaller rivals the equivalent of a kickback to temporarily withhold generic versions of lucrative drugs from market. As FTC chief Jon Leibowitz has pointed out, it’s win-win for everyone involved—except the consumer, that is.

“More and more brand and generic drug companies are engaging in these sweetheart deals, and consumers continue to pay the price,” said Leibowitz, in a statement.

In 2012, major drug manufacturers paid potential competitors to keep as many as 31 generic drugs off the market, the FTC says. Consumers (and the insurance companies that represent them) could have saved as much as $7 billion last year if drug companies did not engage in this unscrupulous practice.

Of course, no one has ever accused the pharmaceutical industry of having scruples. Whether it’s marketing new diseases and then creating the pills to cure them or fighting costly legal battles to keep life-saving AIDS drugs out of the hands of poor people in developing nations, Big Pharma has a long history of putting profits over people—which is especially reprehensible when the product you’re selling often equates to life itself.

Generic alternatives currently account for more than three-quarters of all U.S. prescriptions and save both the U.S. government and consumers a bundle in health-care costs.  According to Leibowitz, the federal government pays about one-third of the nation’s $235 billion annual prescription drug bill. The agency estimates that pay-for-delay currently protects $20 billion worth of brand-name sales from generic competition. The number of these deals has risen by nearly 1,000 percent since 2005 and are expected to increase even more over the next three years as the industry nears the so-called “patent cliff”—when a number of popular brand name medications are set to lose their patent protection.

The FTC, and its counterpart in the European Union, have been lashing out for years against pay-for-delay, but since the practice falls into a legal gray area, they haven’t had a whole lot of luck, until recently. Over the summer the 3rd Circuit Court of Appeals, in Philadelphia, ruled that pay-for-delay deals should be considered anticompetitive unless the parties can prove otherwise.

And last month, the U.S. Supreme Court announced that it would hear the case of FTC vs. Solvay Pharmaceuticals—maker of a testosterone replacement gel called AndroGel. The Department of Justice and FTC allege that the company—now owned by Abbot Labs—violated antitrust laws by paying a rival to keep a generic replacement off the market. The agencies say Solvay paid three generic manufacturers millions of dollars to delay producing a generic version that would have undercut the AndroGel’s price by 75 percent. The case will be argued on March 25th.

The feds will be facing a court that is stacked in favor of big business. By one tally, business interests have prevailed in 68 percent of cases before the Roberts court, a near record high; and in the last SCOTUS session, the U.S. Chamber of Commerce won every single case in which it had an interest. Pay-for-delay is just one more example of big business gouging the consumer in the name of profits. Unfortunately, in a nation guided by the ethics of enterprise, that’s just business as usual.

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