Medical Madness: Drug Firms Accused of Inflating Costs in American Lawsuit

May 30, 2019

2 min read

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What's going on here?

A 500-page lawsuit has been filed by 44 US states alleging an anti-competitive conspiracy between drug makers Teva, Novartis, Pfizer, Mylan and Sandoz to artificially inflate prices by more than 1000% for over 100 generic drugs.

What does this mean?

The price fixing scheme involved generic drugs like antibiotics, contraceptives, antidepressants and treatments for diabetes, cancer and HIV. Generic drugs are not protected by patents and can be easily replicated, theoretically making them cheaper alternatives to brand name drugs. These medicines could save buyers and taxpayers tens of billions of dollars a year on healthcare expenses.

The complaint comes during pressure in the pharmaceutical industry to lower drug prices. For example, Teva was criticised for charging $18,375 per bottle of pills for a rare medical condition known as Wilson disease in February 2018.

What's the big picture effect?

In the US, markets are regulated by the Federal Trade Commission (FTC) and U.S. Department of Justice Antitrust Division. These organisations enforce America’s antitrust laws, which is legislation designed to protect consumers by:

      1. punishing anti-competitive conduct (like collusion)
      2. ensuring mergers and acquisitions (M&A) do not restrict competition and
      3. making sure that consumers are provided with lower product prices and greater choice.

With today’s generic drug market being subject to intense competition, consumers should be spoiled for choice with the medication available and enjoy lower prices as a result. However, collusion by leading pharmaceutical companies has hurt consumers because it has removed their need to compete with other companies and price their products lower.

The conspiracy is one reason why healthcare and prescribed medication is so expensive in America. Consumers, who already struggle to meet medical costs for years have been forced to pay extortionate prices for what should be affordable medicines.

The lawsuit seeks damages, civil penalties and actions by the court to restore competition to the generic drug market. It remains to be seen how America’s courts and regulators will respond to the suit at hand.

Report written by Evania D

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