Are Generic Drugs ‘Reasonably’ Priced? Perhaps Not

This coming January, I will have spent 35 years in the insurance and healthcare arena. During this tour of duty, I have learned that nothing surprises me anymore, especially as it relates to the trust we blindly give to those who appear to act in the ‘best interest’ of the patient and general public.

Here is yet another example – generic drugs and how they are priced.

Generic medications have proven to effectively keep our drug costs low after patent protection expires.  As proof, 90 percent of all prescriptions written in the U.S. are for generic drugs, yet generics comprise only 23 percent of total Rx costs (Source: Association for Accessible Medicines). Yet, new breaking developments suggest that, for at least 300 generic drugs, we are unsuspecting prisoners of a generic drug “cartel” that keeps generic drug costs higher than necessary – thanks largely to a friendly game of price fixing. The adage, “You scratch my back and I’ll scratch yours,” seems to apply quite well in this situation.

A December 10 article in Vox by Dylan Scott, “A groundbreaking antitrust lawsuit is ensnaring the generic drug industry,” explains how at least 16 generic drug companies allegedly rigged the market and fixed prices for roughly 300 generic medications. This article references a recent Washington Post piece that reveals most every state attorney general has now joined in a lawsuit on this ‘itchy’ topic. Have generic manufacturers become the new ‘Pinocchio’ with regulators and the general public?

When our non-healthcare markets are healthy and working appropriately, we can all benefit by paying lower prices for a higher-quality product (or service). However, in healthcare, when left unchecked, simple greed erodes the trust we have placed in a system we believed would ‘fix’ our cost conundrum. With this type of market behavior, American economic theory about consumer choice and market-based pricing mechanisms will find tough sledding in any market, especially with healthcare.

We can do better.

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