Industrial Strength Collusion

Michael Hiltzig is at it again. His latest column points out the scam being run by pharmaceutical companies (large and small) to the detriment of consumers and Medicare/Medicaid. The scam involves patent challenges.

Brand-name drug companies and their generic rivals spend so much time and money attacking each other — in court, in Congress, and everywhere else lawyers and lobbyists do battle — that when they land on the same side of an issue it's a good guess that the consumer is getting whacked. ...

The practice is known as pay for delay. It's what happens when a brand-name company with a valuable drug patent pays a generics company to drop a patent challenge. The goal is to delay the arrival of cheap generic alternatives for months or even years.

The brand-name company gets to maintain its monopoly during the interim, but consumers and taxpayer-funded agencies such as Medicare and Medicaid lose out on the cost reductions of as much as 90% they might enjoy by buying generic versions of a blockbuster drug. The generics companies make out by earning money without facing the uncertainties of patent litigation or the bother of actually manufacturing the drug.

Hiltzig unpacks just how these lucrative tactics came to be, including the fact that at least one drug maker's representative actually bragged on the record on how nicely one deal worked out for his company. Both companies did very well. Consumers? Eh, not so much.

This kind of collusion in any other industry would be a crime, yet at this point, the drug companies have avoided any kind of liability. Since Congress is all hot and bothered about deficits and the cost of Medicare/Medicaid, it might want to do something about this unholy practice.