A brand name drug going off-patent can contribute to cost savings in the health care system. Multiple generic drug manufacturers may enter the marketplace with a pharmaceutically equivalent drug, causing competition and lowering drug prices. If a drug is widely used, many generic manufacturers will apply to the FDA for approval to make the product. Eventually, with many generic versions of the drug in the marketplace, the cost of the generic drug might be 20% or less than the brand name version.
The FDA has tried to encourage generic drug production by shortening the time for approval of the "ANDA" (generic) drug applications. In 2017, more than 1,000 generic drugs were approved, which was an FDA record (see chart). However, in recent years, at least since 2013, the market hasn't been working as expected. Prices of generic drugs have been rising across the board, and in some cases the price increases have been exponential, by 1000% or more.
While the generic drug manufacturers explain that the price increases are because of "industry consolidation, FDA-mandated plant closures, or elimination of unprofitable products," the Department of Justice along with the attorneys general from 47 states (including the District of Columbia) are accusing at least 18 generic drug companies of conspiracy, collusion, and illegal agreements that have amounted to schemes to fix prices and assign market share. In their complaint, the plaintiffs outline how the anti-competitive schemes were crafted within the "cozy" atmosphere within the industry, including regular conferences, trade shows, dinners, parties, and other social events. The plaintiffs claim that because of the conspiracies, "consumers nationwide paid more for numerous generic pharmaceutical drugs than otherwise they would have in a competitive market, and that the companies illegally profited as a result."
The original complaint filed in December 2016 focused on two drugs: Doxycycline (antibiotic) and diabetes drug Glyburide. According to a 2014 report gathered by Rep. Cummings and Sen.Sanders, the price of a bottle of 500 tablets of Doxycycline Hyclate cost $20 in October 2013 and $1849 in April 2014, a percentage increase of more than 8000%. Heritage Pharmaceuticals is identified as the "principal architect and ringleader" of the market conspiracies involving these two drugs. Two of Heritage's executives have since pleaded guilty, paid a $25,000 fine, and agreed to share information with prosecutors. So the case is expanding to include more drugs and more companies. Besides Heritage, some of the companies also being investigated include Teva, Mylan, Mayne, Citron, Aurobindo, Actavis, Ascend, Apotex, Dr. Reddy's, Emcure, Glenmark, Lannett, Par, Sandoz, Sun, and Zydus.
Second Lawsuit Alleges Fraud and Price Fixing in the Generic Drug Market.
In May of 2019, an additional antitrust
lawsuit was filed by attorneys general from 43 states and
Puerto Rico led by
Connecticut Attorney General William Tong. They claim in
a federal lawsuit that generic drug manufacturers conspired to
fix prices and markets of 114 drugs for both minor infections
and chronic diseases such as arthritis, cancer, diabetes and
HIV.
During 2020, some of the defendants chose to plead guilty and
pay a fine. Novartis' generics company Sandoz admitted
conspiring to fix drug prices with four of its competiors and
agreed to pay a $195 million penalty and cooperate with the
antitrust division's ongoing criminal investigation of the
generics companies. Apotex also pled guilty and agreed to pay
a $24.1 million criminal penalty. New Jersey company Rising
Pharmaceuticals also settled and agreed to pay a fine.
In May 2020, amidst the COVID-19 pandemic, generic maker Teva
walked away from settlement talks with the U.S. Department of
Justice, refusing to pay any fines. The New York Times
reported that the company is gambling that the government
will not go forward with pursing criminal charges at a time
when it is a crucial supplier of drugs used to treat the
illness.
Source: FDA Office
of Generic Drugs Annual Reports (heart flutter
- digoxin) (migraine headaches
- amitriptyline) (eczema -
clobetasol propionate) (antifungal -
econazole nitrate) (beta blocker
- propranolol hcl) (gallbladder/cirrhosis
- ursodiol) Source: Centers for
Medicaid and Medicare Services: National Average
Drug Acquisition Cost Data. Click drug name to
go to AskaPatient reviews
Sources and More Reading:
March 2, 2020: Sandoz pleads guilty for conspiring to
allocate customers, rig bids, and fix prices for
generic drugs during 2013-2015 and agrees to pay $195
million, the largest fine paid for a domestic
antitrust case.
Additional Department of Justice releases:
Teva "walks away" from settlement talks with the
Department of Justice in May 2020.
Probe into Generic Price Fixing Set to Widen
Table of Generic Drug Price Increases (prepared by Rep. Elijah E. Cummings, Ranking Member of the House Committee on
Oversight and Government Reform, and Senator
Bernard Sanders, Chairman of the Subcommittee on
Primary Health and Aging) In Connecticut, Tong Leads Lawsuit Against
Generic Manufacturers
May 12, 2019 Press Release
2018
Generic Drugs: Examples of Price Spikes
The charged offense carries a
statutory maximum penalty of a $100 million fine per
count for corporations, which may be increased to
twice the gain derived from the crime or twice the
loss suffered by victims if either amount is greater
than $100 million.
https://www.justice.gov/opa/pr/major-generic-pharmaceutical-company-admits-antitrust-crimes
https://www.justice.gov/usao-edpa/pr/heritage-pharmaceuticals-pays-over-7-million-resolve-civil-false-claims-act-allegations
Heritage Pharmaceutical civil fine and deferred
prosecution agreement for criminal charges
https://www.justice.gov/opa/pr/generic-drug-executive-indicted-antitrust-and-false-statement-charges
February 4,2020 indictment of Taro executive
https://www.justice.gov/opa/pr/generic-pharmaceutical-company-admits-fixing-price-widely-used-cholesterol-medication
May 7, 2020 $24.1 million settlement by Apotex
https://www.justice.gov/opa/pr/second-pharmaceutical-company-admits-price-fixing-resolves-related-false-claims-act
December 3, 2019 $3 million settlement by Rising
Pharmaceuticals in connection with its hypertension
drug Benazepril HCTZ
https://www.nytimes.com/2020/05/15/us/politics/teva-antitrust-hydroxychloroquine-settlement.html