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Games the Rx Drug Industry Plays, Part One
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From the Director
by Catherine R. May
Games the Rx Drug Industry Plays, Part One
Reprinted from Health Action, June 2002, Families USA, 1334 G Street, NW, Washington, D.C. 20005. Included with permission of author, Ingrid VanTuinen.
When Fortune Magazine released its industry rankings for 2001, there was no surprise about the industry that topped the Fortune 500 list. For the last decade, the drug industry has consistently trumped all other industries in terms of profitability. That year, when so many sectors of the economy were tanking, the drug industry managed to generate profits representing an 18.5 percent return on income. How does this industry continue to stay at the top of the heap, in good economic times and bad? In part, it engages in "anticompetitive practices." It files bogus patents, buries its competition-generic manufacturers-in frivolous lawsuits, and even colludes with those manufacturers to keep lower-priced generics off the market. The industry also engages in fraudulent drug pricing and deceptive marketing, and it funds groups that claim to represent consumers opposed to strategies aimed at putting a lid on prescription drug prices.
Both litigation and legislation have taken aim at these practices in an attempt to make the drug industry play fair in the marketplace. In 1984, Congress passed the Drug Price Competition and Patent Term Restoration Act, more commonly known as Hatch-Waxman (for its cosponsors, Sen. Orrin Hatch [R-UT] and Rep. Henry Waxman [D-CA]). This bill was designed to foster generic competition by decreasing the time it took to bring generic drugs to market, and it worked: Consumers' access to lower-priced generics has increased because of Hatch-Waxman. From 1983 to 1995, generics went from representing 19 percent of the market to 40 percent of the market, although their share of the market has increased little since 1995.
However, Hatch-Waxman also includes provisions designed to protect drug patent holders. And over the years, the drug industry has gotten away with repeatedly manipulating the incentives and protections in Hatch-Waxman to delay generic competition and extend its brand-name monopolies. This has led to dozens of class-action lawsuits against brand manufacturers.
Part Two will be in the October Issue of Berkshire Senior.