In the third article of a four-part series, Everest Fang, an incoming Harvard Law School student and a 2020 JURIST Digital Scholar studying competition law, directs the attention of Americans towards the practice of pharmaceutical companies engaging in conspiracies to increase the prices of essential drugs...
A few months ago, the pharmaceutical company Gilead Sciences set a price tag on their drug remdesivir, the first medication shown to be effective for treating coronavirus. The price was set at $520 per vial or $3,120 per treatment course. Experts have called the price “not exorbitant,” and some expected a higher price tag. Yet, critics have pointed out that remdesivir research was partly funded by a $99 million federal investment, meaning taxpayers have essentially paid for the development of the drug. Should they really be charged anything, let alone $3,120, for a life-saving medication in which they invested millions of dollars? Indeed, nearly all FDA-approved drugs are developed with public funding, meaning the cost of expensive drugs for Americans is even higher than we think. Nevertheless, the price of remdesivir is not necessarily outrageous. Yet, perhaps more concerning is the anxiety leading up to the pricing decision. Government and citizens alike were completely powerless before Gilead executives. According to the statement from the Institute for Clinical and Economic Review, “Gilead has the power to price remdesivir at will in the U.S., and no governmental or private insurer could even entertain the idea of walking away from the negotiating table.”
Remdesivir is not the first drug to face pricing scrutiny. Doxycycline Hyclate is an antibiotic used to treat a variety of conditions including malaria, Lyme disease, and several STDs. Between October 2013 and April 2014, the average market price of this essential medication increased by 8,281 percent. During the same period, the average market price of albuterol sulfate, a life-saving drug used to treat asthma and other lung conditions, rose by 4,014 percent. Why would the price of anything, let alone life-saving medication, rise so dramatically? Investigations have revealed that pharmaceutical companies conspired to raise drug prices, demonstrating critical flaws in a market that is vital to the health of millions of Americans. The pandemic put the spotlight on Gilead, but before COVID-19 also, many pharmaceutical companies colluded for years to produce prices much higher than that of remdesivir. This virus and the race to find treatments provide an optimal opportunity to consider the pharmaceutical industry’s rampant abuse of pricing power and its deleterious effects on the American people.
Over the past few years, several prosecutors have accused pharmaceutical companies of conspiring to inflate the prices of essential medications. The charges allege that executives used several strategies to boost prices. The most common tactic is to discreetly communicate with competitors to agree on an elevated price. Another practice involves rigging the bidding process for a medication to ensure its final sale price ends up high. Drugmakers are also accused of allocating customers to one another to eliminate price competition. In many cases, corporations have been charged with all three of these crimes.
The Department of Justice (DOJ) has led an extensive investigation into the alleged conspiracies of the pharmaceutical industry and exposed rampant criminal behavior. Last May, the company Heritage Pharmaceuticals admitted to fixing prices, rigging bids, and allocating customers for glyburide, a diabetes medication. A few months later, Rising Pharmaceuticals admitted to fixing prices and allocating customers for Benzepril HCTZ, a drug used to treat hypertension. In March, Sandoz Inc., one of the largest manufacturers of generic drugs, admitted to fixing prices, rigging bids, and allocating customers for a wide variety of ointment, solution and inhalant medications. At the end of June, Glenmark Pharmaceuticals admitted to fixing the price of several generic drugs including pravastatin, a medication that reduces cholesterol to prevent heart attacks and strokes. A month later, Taro Pharmaceuticals admitted to fixing prices, rigging bids, and allocating customers for various medications that treat seizures, bipolar disorder, arthritis, and skin conditions. The repeated admissions of guilt have gradually revealed an extensive criminal conspiracy among pharmaceutical companies. As the DOJ and others continue to investigate, more guilty pleas are expected. In a recent update, just a few weeks ago, Teva Pharmaceuticals was charged with fixing prices, rigging bids, and allocating customers for a long list of drugs including those used to treat heart diseases, stroke, arthritis, seizures, blood clots, brain cancer, cystic fibrosis, and hypertension. The DOJ alleges that Teva has overcharged consumers at least $350 million. Between 2014 and 2017, the Justice Department estimates that about 5 percent of generic drugs were overpriced due to collusion, with the average price increase being 1,350 percent.
The investigations reveal that over the past several years, pharmaceutical corporations have illegally profited off of the medical conditions of American patients. This problem appears to be unique to our country. Last year, a report from the House Ways and Means Committee found that on average, Americans pay four times more for drugs than people pay in other countries. In some cases, they pay 67 times more for the same drug. The evidence is increasingly damning. Yet, despite numerous admissions of guilt and the collection of over $224 million dollars in criminal penalties, success in prosecuting drug companies has been limited. Most major pharmaceutical companies can afford to pay millions in fines, and the penalty is no guarantee that they will change their behavior. These corporations are protected by a hard fact: Americans need medications. The question of how severely to punish the pharmaceutical industry for their blatant greed and disregard for human life is always beset by the country’s reliance on their products. Moreover, this tension has been dramatically escalated by a pandemic raging through the country, a crisis in which much of our hope lies in the development of an effective vaccine or medication.
Pharmaceutical executives are well aware of the power they wield. It is, perhaps, why they engaged in such an extensive conspiracy in the first place. Moreover, with the COVID-19 crisis in full swing, they sometimes seem untouchable. Back in April, Teva, one of the world’s largest makers of generic drugs and the company charged just a few weeks ago by the DOJ, simply walked out of settlement talks with the Justice Department, essentially daring them to press charges. This bold move came at a time when coronavirus panic was at its peak, and President Trump was erroneously touting the drug hydroxychloroquine as a treatment. Teva is a manufacturer of hydroxychloroquine and had been in talks with the White House about producing the drug as well as other potential treatments. The DOJ was understandably wary of charging a potential partner in the fight against COVID-19. After years of allegedly extorting American patients, Teva executives temporarily escaped justice by flexing their market power. Though they have now been charged, Teva’s bold behavior in April was a troubling demonstration of the immense control they have over our country. It remains to be seen how the case will progress.
Since 2016, three lawsuits have been filed against 15 pharmaceutical companies for conspiring to inflate the prices of 200 generic drugs. For the most part, corporations are getting away with their crimes. The difficulty of lowering drug prices, particularly during a public health crisis, reflects the importance of rethinking competition in this arena. It is painfully clear that market forces are not driving high quality and low prices in pharmaceuticals; rather, corporate executives are abusing their power to make billions while Americans forego needed medications. How much longer will we allow them to reign over our life-saving drugs?
In today’s pharmaceutical market, our lives rest in the hands of a few corporate executives. Antitrust investigations have revealed that these people consistently prioritize their own income over the health of the American people. For several years now, competition in the drug industry has been eclipsed by corruption. To further complicate the problem, punishment is not always effective. Officials must constantly be wary of financially crippling companies that produce life-saving products. The result is corporate boardrooms with enormous power. Years of antitrust investigations culminating in the pandemic have helped bring that power into the spotlight. With limited success in competition law enforcement, it may be time for the American government to take more aggressive steps towards seizing power from the pharmaceutical industry. We cannot trust profit-driven companies with our lives. We must give that power back to the people.
This is the third article in a four-part series. Be sure to check out the first and second articles.
Everest Fang is a 2020 JURIST Digital Scholar. He graduated this May from Yale University with a BA in Economics and Mathematics. He was admitted to Harvard Law School through its Junior Deferral Program and plans to begin his studies there in fall 2022. In August, Everest began working at Deloitte’s Government/Public Services Consulting Office in Washington, DC.
Suggested citation: Everest Fang, Medication, Collusion and the Pandemic, JURIST – Student Commentary, September 18, 2020, https://www.jurist.org/commentary/2020/09/everest-fang-medication-collusion-and-pandemic/.
This article was prepared for publication by Akshita Tiwary, JURIST’s Staff Editor. Please direct any questions or comments to her at firstname.lastname@example.org
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