Generic drugs are exact copies of brand-name drugs, but they cost an average of 80% less because multiple companies can sell the same drug and they do not have to pay for costly clinical trials. This is why nearly 90% of prescriptions filled in the U.S. are for generic drugs.
So when the average price of generic drugs suspiciously jumped 450% from 2013 to 2014, the state of Connecticut investigated. They discovered “evidence of a broad, well-coordinated and long running series of conspiracies to fix price and allocate markets” for generic drugs.
The price-fixing scheme was coordinated at industry conferences, steakhouse dinners, cocktail parties, and golf outings — boosting costs for consumers with deadly diseases who were already struggling to pay for their medications, as well as the entire healthcare system.
Michael Carrier, an antitrust expert at Rutgers Law School, told USA Today:
Generic drugs are supposed to lower prices for consumers. But when generic manufacturers get together to increase prices, divide markets and cover their tracks, the system doesn’t work.”
Teva Pharmaceuticals, Mylan, and four smaller generic drug companies were accused of price-fixing an antibiotic and a diabetes drug in a lawsuit filed by the Justice Department and 20 states.
The price of the antibiotic — docycycline — jumped from $20 for 500 pills to $1,845 between October 2013 and May 2014.
“We believe that this is just the tip of the iceberg,” said Connecticut Attorney General George C. Jepsen. “I stress that our investigation is continuing, and it goes way beyond the two drugs in this lawsuit, and it involves many more companies than are in this lawsuit.”
Criminal charges were also filed against two ex-executives at Heritage Pharmaceuticals — former CEO Jeffrey Glazer, and former president Jason Malek — for conspiring with other companies to set drug prices. Heritage also sued the men for embezzling tens of millions of dollars.