Big Pharma cuts deals to keep profits high

Big Pharma cuts deals to keep profits high

It's no wonder the cost of prescription drugs is so high. Pharmaceutical companies regularly conspire with their competitors to keep lower-cost generic drugs off the market-a practice that the federal court system seems to wholeheartedly support. Go figure.

But the Federal Trade Commission isn't so fond of such anti-competitive practices. The FTC just filed suit against Cephalon, a major pharmaceutical company, to put a stop to its monopoly of Provigil (a drug designed to aid patients with narcolepsy and sleep apnea issues).

Cephalon's exclusivity on Provigil was being challenged by four other pharmaceutical firms that planned to get their share of Provigil's $800 million in annual shares by marketing a generic version. But rather than defend its patent against its competitors in court, Cephalon decided it was a better use of time and money to merely buy off the competing drug companies.

So that's just what it did. Cephalon doled out upwards of $200 million in payouts to the competition, which agreed to keep their Provigil knock-offs off the market for the next seven years. In effect, Cephalon bought its way out of the controls of a free market economy.

Sounds like a win-win situation, right? The competing companies got their cut. And in exchange, Cephalon reaped huge gains - a profit of around $4 billion according to one Cephalon executive. So what's the harm? I'll tell you.

Guess where that $4 billion in profits comes from? You and me. That's the harm. The agreement between Cephalon and the other drug companies amounted to a price fix. Insurers, employers, patients, and the U.S. government (Provigil is widely distributed to GIs in Iraq to help them remain alert during night missions) are forced to pay whatever price Cephalon chooses for the brand-name version of Provigil because there are no other options.

Can you say "monopoly?"

Incredibly, this practice is becoming more and more common. It's bad enough that Big Pharma has seemingly bottomless pockets with which to spend untold millions to spread their influence and agendas throughout government regulatory commissions and the ranks of healthcare professionals. Now it seems they even have the power to create their own personal economies. It's an outrage, and the word needs to get out about it.

The consumer benefits of generic drugs are staggering. When a generic version of any drug hits the market, the price for that drug falls by - are you ready for this? - as much as 80 to 90 percent. When products like Prozac, Platinol, Zantac, and Taxol go generic, it's estimated that it will save consumers over $9 billion. Billion! With a "B!"

But Cephalon's "pay for delay" sweetheart deals are the latest loopholes the Big Pharma weasels (or, more accurately, Big Pharma's lawyers, who are weasels for hire) have found to keep those titanic profits rolling in.

Unfortunately, what's needed is a new and tougher law against these arrangements. We need Congress to enact stricter regulations that can prevent this sort of legalized price gouging. The FTC can try to intervene, but they're swimming upstream. As I mentioned before, the vast war chest of funds that Big Pharma has at its disposal can forestall the creation of a law like this. Heck, when a deal nets you $4 billion, you can spare a few hundred million to line the pockets of the right political campaigns.

Think about all the congressmen and senators that can be influenced by Big Pharma lobbyists with hundreds of millions at the ready. I'm sorry to be so cynical, but this is unfortunately what makes the wheels go around in Washington.

It's likely that the Cephalon case could be pursued all the way to the Supreme Court. But the truth is we're likely to be paying for deals like this for years to come until someone with a conscience - whether in government or in healthcare - decides to do the right thing.