States Sue Drugmakers Over Alleged Generic-Price-Fixing Scheme | Connecticut Public Radio
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States Sue Drugmakers Over Alleged Generic-Price-Fixing Scheme

May 13, 2019
Originally published on May 13, 2019 8:40 pm

Connecticut Attorney General William Tong has a skin condition called rosacea, and he says he takes the antibiotic doxycycline once a day for it.

In 2013, the average market price of doxycycline rose from $20 to $1,829 a year later. That's an increase of over 8,000%.

Tong alleges in a new lawsuit that this kind of price jump is part of an industrywide conspiracy to fix prices.

The suit is a whopper — at least 43 states are suing 20 companies, and the document is over 500 pages long. It was filed Friday in the U.S. District Court in Connecticut.

The lawsuit alleges that sometimes one company would decide to raise prices on a particular drug, and other companies would follow suit. Other times, companies would agree to divide up the market rather than competing for market share by lowering prices.

It says these kind of activities have been happening for years and that companies would avoid creating evidence by making these agreements on golf outings or during "girls nights outs" or over text message.

In several examples, the suit cites call logs between executives at different companies, showing a flurry of phone calls right before several companies would all raise prices in lockstep.

All of this, according to the lawsuit, resulted "in many billions of dollars of harm to the national economy."

Connecticut Attorney General William Tong says the generic drug industry is profiting "in a highly illegal way" from Americans. Tong is at the forefront of a multistate lawsuit filed May 10 that alleges companies worked together to set prices.
Frankie Grazian/Connecticut Public Radio

Consumers don't always notice when a generic drug's price increases rapidly. People without insurance, of course, pay full price, but even people with insurance can feel the impact.

"More people than ever before are paying based on the price of the drugs," explains Stacie Dusetzina, a professor at Vanderbilt University who studies drug pricing. Often, patients have to meet a deductible before their health plan's coverage kicks in, so "they pay full price until they reach a certain level of spending, or they pay a percentage of the drug's price — we call that a coinsurance."

Surveys show more Americans are having trouble paying out-of-pocket medical costs. The average annual deductible in job-based health plans has quadrupled in the past 12 years and now averages $1,300.

But, Dusetzina says, even if you only pay a modest copay — such as $5 for every prescription you pick up — if your insurance company is paying more for prescription drugs, it can raise your health plan's premiums the following year. "So ultimately these costs do get borne by the consumer in some way," she says.

Dusetzina says what this lawsuit alleges is "very disappointing" — a situation in which consumers put up with the high price of branded drugs because of the implicit promise that a generic is coming some day and will eventually bring the price down.

But that outcome doesn't happen automatically; it relies on healthy competition and market forces to work. If there's only one generic version available, that drugmaker can set the price at pretty much the same level as the brand name.

"The higher the number of competitors, the more we see price reductions from the branded drug price," she says. "So the magic number seems to be around four manufacturers."

And that assumes those drugmakers aren't talking to each other and agreeing to coordinate rather than compete.

The main drugmaker cited in the lawsuit is Teva, an Israeli company. In a statement, Kelley Dougherty, vice president of communications and brand, Teva North America, told NPR that the company is reviewing the allegations internally and that Teva "has not engaged in any conduct that would lead to civil or criminal liability."

The company has also asserted that there's nothing new here. It's true that the new lawsuit is similar to past lawsuits, though none of them included so many states as plaintiffs.

Tong has emphasized that the investigation is ongoing. Given the amount of political appetite there is to bring drug prices down, there are certainly more lawsuits to come.

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AUDIE CORNISH, HOST:

High drug prices are a favorite topic among politicians from all parties.

(SOUNDBITE OF MONTAGE)

PRESIDENT DONALD TRUMP: Prescription drug prices are out of control.

BERNIE SANDERS: Why do drug companies charge so much?

ELIZABETH WARREN: The high cost of prescription drugs is a huge problem.

UNIDENTIFIED PERSON: The common-sense things necessary to drive down the cost of drugs.

CORNISH: And a new lawsuit alleges prices of generic drugs are higher than they should be because of an industry-wide conspiracy to fix prices. NPR's Selena Simmons-Duffin is here to explain. Welcome to the studio.

SELENA SIMMONS-DUFFIN, BYLINE: Thank you.

CORNISH: What does this lawsuit say?

SIMMONS-DUFFIN: It's a whopper. More than 40 states are suing 20 companies. The suit is over 500 pages long. It was filed on Friday in the U.S. District Court in Connecticut. And that state's attorney general, William Tong, held a press conference today and gave a little personal anecdote.

(SOUNDBITE OF PRESS CONFERENCE)

WILLIAM TONG: I have a little rosacea. And so I take Doxycycline, which a lot of people take every day. And I take one pill every day of Doxycycline. "60 Minutes" reported that over a one or two-year period, Doxycycline shot up 8,000%.

SIMMONS-DUFFIN: So the suit says this type of price jump was coordinated across competing manufacturers. So sometimes one company would decide to raise prices on a particular drug, and then the other companies would follow suit. And other times, one company was allowed to take a certain share of the market. So the suit alleges this type of thing has been happening for years and that companies would avoid creating evidence by making agreements on golf outings or a girls' night out or sending text messages.

CORNISH: So what evidence do they have then?

SIMMONS-DUFFIN: Well, the suit describes several cooperating witnesses that were involved in the price fixing. And then there are text message exchanges and phone call logs. So as an example from previous filing - Nystatin, which is an antifungal tube of medication - it's been around since 1954. And there were three main drugmakers. And then the lawsuit alleges that executives began calling each other in 2013 and 2014. And so a tube of Nystatin was available in 2011 for $9.15, and in 2014, it cost $103.88.

CORNISH: Have consumers been seeing these price jumps at the pharmacy?

SIMMONS-DUFFIN: It kind of depends. If you don't have insurance, you're definitely going to see the price jump because you're paying everything. But Stacie Dusetzina, who's a professor at Vanderbilt who studies drug pricing, says that even with insurance, people can feel the impact.

STACIE DUSETZINA: More people than ever before are paying based on the price of the drug. So that means that they're paying a deductible where they pay for price until they reach a certain level of spending, or they pay a percentage of the drug's price. We call that a coinsurance.

SIMMONS-DUFFIN: But even if you only pay a copay, like $5 for every prescription, if your insurance company is paying more for prescription drugs, they're going to pass those costs on with higher premiums. So she says that what this lawsuit alleges is really disappointing, that consumers put up with the high price of branded drugs because of the promise that a generic is coming and it's going to bring the price down.

But that doesn't happen automatically. It relies on competition and market forces. And she says if there's only one generic, that drug maker can put the price at pretty much the same as the brand name. And you really need more companies in the market to see those prices go down.

CORNISH: What do drug makers say about all this?

SIMMONS-DUFFIN: The main one in the suit is Teva, which is an Israeli company. A Teva spokesperson sent me a statement that they're reviewing the allegations internally and that the company, quote, "has not engaged in any conduct that would lead to civil or criminal liability." The company has also said basically there's nothing new here.

It's true that this is similar to past lawsuits, although this is very thorough. And the Connecticut attorney general, William Tong, has emphasized that the investigation is ongoing. And given the amount of political appetite there is to bring prices down, there are more lawsuits to come.

CORNISH: That's NPR's Selena Simmons-Duffin. Thanks for your reporting.

SIMMONS-DUFFIN: Thank you. Transcript provided by NPR, Copyright NPR.