The Big “Secret Price-Gouging Swindle” Drug Companies Will Never Admit…

Posted By Dr. Mercola | September 09 2010 | 15,597 views

 “Pay for Delay” Schemes Should be Made Illegal

When a brand-name drug comes off patent, generic equivalents emerge that typically cost consumers far less than the brand-name version. Generic drugs are still overpriced in their own right, but less so than the brand-name drugs.  In the event that a generic drug manufacturer challenges a patent on a brand-name version, it can lead to a costly legal battle that may end up with a lost patent for the brand-name drug.  Knowing this, drug companies will offer to pay their generic rivals a significant sum of money in exchange for delaying the release of their lower priced, generic drug. Both companies profit from the scenario, but consumers lose out by having to continue to pay drug prices that are essentially fixed by the pharmaceutical companies themselves.

There is now a bill pending in the Senate that would essentially ban pay-for-delay schemes because they are both illegal and anticompetitive, but it remains uncertain whether the bill will actually pass -- an atrocity considering how much money is being wasted by allowing pay-for-delay to continue. According to the Federal Trade Commission, ending the practice would save consumers at least $3.5 billion a year, while the Congressional Budget Office stated banning pay-for-delay would reduce the federal deficit by $2.6 billion in the next 10 years.

Drug Companies Get to Name Their Price with Very Little Competition

Drug prices are rising at more than twice the rate of inflation, and the prices of the most heavily prescribed drugs are routinely raised, sometimes several times a year. Some medications have a mark-up of 1,000 percent over the cost of their ingredients. In any other industry, price hikes of 100 percent or 1,000 percent simply would not be tolerated. But the drug companies are largely insulated from the supply-and-demand cycle that drives costs for other consumer goods. For one thing, drug companies have the upper hand in negotiating prices. There are currently no scientific standards for analyzing the cost-effectiveness of new drugs, and this can be so widely interpreted that just about any price can be justified and consumers have no way to gauge whether the effects of a drug are worth the price.

Plus, there is very little competition for drugs sold in the United States. In addition to drug companies paying off their competitors to keep prices high, Americans are warned not to get their drugs from other countries where prices are far less expensive. The FDA went so far as to tell Americans not to buy prescription drugs from Canada because they might be "contaminated by terrorists." As a result, Americans spend 10 times the amount on drugs that people in, say, Canada do.

And please don’t fall for the drug companies' marketing hype that drug costs are rising to cover their extensive research and development phase. Their prices are negotiated in secret and the outcome is based largely on the bargaining power of a particular country or health plan. This means that when drugs are sold to consumers, there is not usually one set price. Prices vary from very low to very high and the price you are charged depends on a number of factors, including the country in which you reside and whether or not you have health insurance.

Why is Government Continuing to Protect Big Pharma at YOUR Expense?

The bill currently lingering in the Senate that could put an end to pay-for-delay practices that are costing consumers billions of dollars a year has been on the table for some time … but so far it’s never made it to final passage because of the pharmaceutical industry’s intense lobbying power. This is a pattern that the U.S. government seems more than willing to uphold.

Last year, a behind-the-scenes deal negotiated by the Senate Finance Committee essentially limited drug companies’ share of costs of national health care reform to a total of $80 billion over 10 years. Meanwhile, the White House agreed to oppose any congressional efforts to use the government's leverage to bargain for lower drug prices or import drugs from Canada or Europe! Why are drug companies able to make deals with the government?- Because of their extreme financial power. Remember, they are the leading lobbyists in Washington, spending more to sway legislation than any other industry. The pharmaceutical industry spent $1.5 billion lobbying Congress in the last decade, and in so doing has manipulated the government’s involvement with medicine and secondarily reinforced our dependence on them, through government policies.