Generic Drug Makers in Legal Trouble

Healthcare in the United States is expensive, and it’s getting more expensive all the time. Overall, the cost of healthcare has jumped almost 25 percent since 2007, and much of this increase is due to the rising cost of prescription drugs. Generic drugs, widely viewed as beneficial to our healthcare system because of their high value and low prices, have been no exception. In the 19 months beginning July 2013, prices on many generic drugs skyrocketed, some by as much as 1,000 percent.

The Lawsuit

These dramatic increases didn’t go unnoticed by regulators. On May 10th of this year, 44 states filed a joint lawsuit against 20 drug makers and 15 individuals for illegally manipulating the generic drug market to fix prices on over 100 generic drugs. It’s 500 pages long and filled with repetitive legalese, but it’s an interesting read nonetheless, the key phrase in the allegations being this: “a horizontal conspiracy to allocate markets and fix prices” on generic drugs. Ultimately this behavior led to states and insurers being overcharged due to a rigged market and a conspiracy against the best interests of the American public.

The lawsuit names pharmaceutical giant Teva as the leader of the conspiracy and indicates that the participants knew what they were doing was illegal, and so intentionally did not leave a paper trail. Representatives of the companies involved often met at industry dinners, golf outings, cocktail parties, lunches, and “girls’ nights out” to discuss strategy and sensitive information. According to Connecticut Attorney general William Tong, prosecutors have text messages, emails, phone records, and former industry insiders that will prove the conspiracy.

A Breach of Ethics

This kind of behavior is inherently bad for a market economy, and we’ve always known this. In fact, the lawsuit itself quotes Adam Smith, the Father of Capitalism, from his landmark 1776 treatise “An Inquiry into the Nature and Causes of the Wealth of Nations.” Smith wrote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Insofar as “Wealth of Nations” is the bible of capitalism, what these people allegedly did is a cardinal sin.

The pharmaceutical industry has a history of legal issues, with a total of 412 settlements reached between itself and federal and state governments from 1991-2017, both civil and criminal. The current lawsuit seeks civil penalties, damages, and court actions to restore the harm done to our healthcare system. The charges themselves are that bad actors in the pharmaceutical industry violated antitrust law. But this is more than just another example of corporate greed — it shines a light on just how little the people with big, corner offices care about the public interest or anything else that stands between themselves and larger profit margins. They’re getting so fat they don’t even seem to mind the bad publicity.

These allegations are serious, and if proved true just uncover another layer in what many perceive to be an overall conspiracy within the healthcare industry to keep costs high and the money flowing in a country with the highest healthcare bill in the developed world by a longshot. This ultimately means a lower quality of life for most of us who don’t work in those corner offices or attend those cocktail parties, and many of us will suffer because of these misdeeds.