Alaska joins lawsuit against generic drug manufacturers
September 1, 2019
We often think of people who espouse “conspiracy theories” involving the machinations of huge multinational firms as a bit unhinged, gullible or misinformed. Not this time. This is a mammoth conspiracy that affects all of us, according to dozens of state attorney generals including Alaska’s.
Earlier this year the State of Alaska along with 41 additional states and Puerto Rico joined with the State of Connecticut to sue 20 generic drug manufacturers for conspiracies to artificially inflate and manipulate prices and reduce competition for more than 100 commonly used generic drugs. These are not little local companies that no one has ever heard of.
These include the biggest multinational drug companies such as Teva, Sandoz, Mylan and Pfizer. In some cases, these actions by the corporate conspirators have caused the price of generic drugs to rise by as much as 1,000%.
Since approximately 90% of all prescription drugs sold in the United States are generics, the price gouging practiced by these companies has directly affected most Americans. The medications affected in the alleged profiteering scheme include antibiotics, nonsteroidal anti-inflammatory drugs, antidepressants, cholesterol-lowering statins, and angiotensin-converting enzyme inhibitors and beta blockers for treating hypertension and heart disease.
Attorney General Tong from the State of Connecticut originally initiated the research into the alleged conspiracy. He has not minced words about his findings: “We have hard evidence that shows the generic drug industry perpetrated a multi-billion-dollar fraud on the American people … We all wonder why our healthcare, and specifically the prices for generic prescription drugs, are so expensive in this country — this is a big reason why.”
Alaska Attorney General Clarkson has been equally as candid: “Frankly, this type of behavior is unconscionable. I am glad the court agreed to disclose the full complaint so Alaskans can see the misleading and illegal collusion these companies appear to have been engaged in. And all at the expense of people’s health.”
The 524-page complaint filed by dozens of attorney generals is loaded with specific examples and in parts reads like a best-selling legal thriller. According to the summary,
For many years, the generic pharmaceutical industry has operated pursuant to an understanding among generic manufacturers not to compete with each other and to instead settle for what these competitors refer to as “fair share.” This understanding has permeated every segment of the industry, and the purpose of the agreement was to avoid competition among generic manufacturers that would normally result in significant price erosion and great savings to the ultimate consumer.
Rather than enter a particular generic drug market by competing on price in order to gain market share, competitors in the generic drug industry would systematically and routinely communicate with one another directly, divvy up customers to create an artificial equilibrium in the market, and then maintain anticompetitively high prices.
But that’s not all. According to the complaint, the goal was not only to prevent price erosion, but also to substantially raise the prices of generic drugs already on the market:
By 2012, Teva and other co-conspirators decided to take this understanding to the next level. Apparently unsatisfied with the status quo of “fair share” and the mere avoidance of price erosion, Teva and its co-conspirators embarked on one of the most egregious and damaging price-fixing conspiracies in the history of the United States. Teva and its competitors sought to leverage the collusive nature of the industry to not only maintain their “fair share” of each generic drug market, but also to significantly raise prices on as many drugs as possible.
In order to accomplish that objective, Teva selected a core group of competitors with which it already had very profitable collusive relationships – Teva referred to them as “High Quality” competitors – and targeted drugs where they overlapped. Teva had understandings with its highest
quality competitors to lead and follow each other’s price increases, and did so with great frequency and success, resulting in many billions of dollars of harm to the national economy over a period of several years.
At the zenith of this collusive activity involving Teva, during a 19-month period beginning in July 2013 and continuing through January 2015, Teva significantly raised prices on approximately 112 different generic drugs.
More information about this extraordinary legal case is available from the Alaska Dept. of Law website -- http://www.law.state.ak.us/press/releases/2019/062619-DrugPriceFixing.html. Note that the first link in the press release takes you to a copy of the full 534-page complaint.
A final thought: Don’t automatically dismiss all “conspiracy theories” as flaky ideas fabricated by goofy guys in tinfoil hats. The important question is, “What is the evidence?”
Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.