Drug Company Shenanigans

Earlier in the week I highlighted a study showing that a measure of pharmaceutical innovation was associated with increased longevity. I knew the honeymoon couldn’t last; we’re back to shenanigans. For years, big drug companies have been paying their competitors to keep cheaper generic competition off the shelves. That way the larger company can keep charging really high prices for their drug without competition. The smaller companies get big payoffs, and don’t have to do anything at all. Everyone wins. Well, except the rest of the country:

Last year, the Congressional Budget Office estimated that a Senate bill to outlaw such payments would save the federal government $4.8 billion over 10 years and would lower drug costs in the United States by $11 billion. The legislation remains stalled in the Senate. The federal government is a major buyer of drugs through Medicare and the Department of Veterans Affairs.

Such agreements were just ruled illegal by the Third Circuit Court of Appeals because they are anticompetitive. The drug companies disagree, of course. They say these agreements are a way to settle lawsuits about patents.

I’m just struck by the fact that these kind of actions seem to cost the federal government more than $400 million a year. That’s just a bit more than the entire budget for AHRQ, which would be the first place I’d go to get funding to show just how much this kind of thing is costing Americans each year. But we need to gut AHRQ because we “don’t have the money“.

I’m just saying.

[Cross-posted at The Incidental Economist]

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