Drug Companies Accused of Price Fixing
There is a scandal being investigated about generic drug price fixing.
Credit: © McGraw-Hill Education/Christopher Kerrigan

Drug Companies Accused of Price Fixing

Imagine that you go to the pharmacy to pick up a medication that you’ve been taking regularly for years. But instead of the $30 a bottle that you usually pay, the pharmacist tells you that you will now need to pay $150 for the same bottle. What happened? A coalition of states led by the Attorney General of Connecticut is suing a group of generic drug manufacturing companies, which they say have been participating in this kind of illegal price-fixing for years. Here, Election Central takes a closer look.

What Happened?

On May 10, 44 states–led by Connecticut State Attorney General William Tong–filed a 500-page lawsuit in the U.S. District Court in Connecticut against 20 major drug companies which they say have been working together to dramatically inflate the price of 114 generic prescription drugs in order to generate profits.

Here’s how they say the scheme worked: usually, in a free market system, companies producing similar products will compete against each other for customers. One of the ways they do this is by lowering prices. But when price fixing occurs, the companies all get together and secretly agree on what the price of the product will be. And because they control the market, consumers are stuck paying that price. In the case of the drug companies, agreements were made between the companies “off the record” during lunches, golf outings, and via text messages. Phone records show that typically, many phone calls were made between these companies just before the announcement to raise prices was made. The end result, according to the lawsuit, was that prices of generic prescription drugs were increased by as much as 2,000% in the past decade.

How Were American Consumers Affected?

The impact of this kind of price fixing on American consumers is nothing short of devastating. When people find that the price of a medication they need has suddenly increased by several hundred percent, they must find a way to pay for it–often drawing from college, retirement, or savings accounts to do so. Or they may choose to go without, taking on new medical consequences. Because the drugs involved are ones needed to treat serious conditions such as high blood pressure, diabetes, and cancer, going without the drug may land patients in the hospital–or worse. At best, this leaves the patient with the bill for an expensive hospital stay. At worst, affected consumers will try to ration how much of the drug they can afford to take (sometimes only filling half of their prescription), with dangerous results.

The people most affected are the ones with high-deductible plans. But even if you are lucky enough to have an insurance policy that covers the cost of your prescription drugs, the rising cost of these drugs will probably cause the insurance company to raise your premium for next year. So either way, you wind up shouldering the additional cost burden.

Do They Have a Case?

The drug companies involved argue that the prices of generic drugs have actually come down in recent years, and that the average price of generics is significantly lower now than it was back in 2007. But Tong’s office argues that just from the years of 2013 to 2015–the identified high point of generic drug price fixing–participating drug companies made billions of dollars in profits. In addition, Tong’s office has filed 300 subpoenas and has collected 18 million phone records, emails, and text messages which they say solidify their case.

What Do You Think? Write a letter to your state representative explaining why it is important to investigate drug companies and keep drug prices as low as possible. Feel free to include a personal story or some of your own research in your letter if you wish.
Valerie Cumming

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