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Recently, Congress has focused on reforms to address pharmacy benefit managers’ (PBMs) role in high drug prices for patients. Congress must not excessively restrict PBMs’ ability to negotiate with manufacturers; alternatively, reforms could be paired with other policies that address the high prices of brand-name drugs.

Summary

When a patent on a pharmaceutical product expires, therapeutically equivalent generic versions of the drug rapidly enter the market. Competition among the generic producers ordinarily causes the price of drugs to plummet. This, of course, is socially beneficial since consumers are considerably better off. Health insurers are also better off because the costs of insurance claims fall. Nearly everyone gains – except for the pioneer firm whose patent monopoly has expired. For many generic drugs, however, this scenario has failed to materialize because the generic producers allegedly decided to collude rather than compete. Various state attorneys general have filed complaints against 30 well-known generic drug manufacturers for their alleged collusion of more than 160 pharmaceutical drugs. The complaints allege that a large-scale cartel engaged in price fixing, customer allocation, and bid rigging in the market for generic drugs, leading to higher prices and lower sales.

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Addressing High Drug Prices by Reforming Pharmacy Benefit Managers

7 - Collusion in Generic Drug Markets

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Addressing High Drug Prices by Reforming Pharmacy Benefit Managers

7 - Collusion in Generic Drug Markets

Summary