The tactic, known as “pay for delay,” occurs when a brand-name drug maker pays a significant sum of money to a generic drug maker in exchange for delaying the marketing of the new generic drug.
This allows brand-name drug makers to keep earning profits without competition, while the generic drug maker gets a large sum of “easy, risk-free money.”
As the New York Times reported:
“Both companies profit. The consumer, unfortunately, loses — by paying high, brand-name drug prices instead of lower prices for a generic. The Federal Trade Commission, which has been campaigning to end the practice, estimates that pay-for-delay agreements cost consumers at least $3.5 billion a year.”
Many people still do not understand the enormous power wielded by the pharmaceutical industry. They, in a very real sense, have dictated the rules of the entire health care system through their massive lobbying, and their financial influence has shaped the health of the entire U.S. population, if not the world, for the worse.
At the heart of their financial success, of course, are the extremely profitable drugs that so many Americans use on a daily basis. The drug prices not only start out extraordinarily high to begin with, but the drug companies have underhanded tactics to ensure their profits keep rolling in, unchallenged, for as long as possible.
One of the most blatant of these is known as “pay for delay” -- and there is legislation pending in the Senate that could stop it in its tracks.
“Pay for Delay” Schemes Should be Made Illegal
When a brand-name drug comes off patent, generic equivalents emerge that typically cost consumers far less than the brand-name version. Generic drugs are still overpriced in their own right, but less so than the brand-name drugs.
In the event that a generic drug manufacturer challenges a patent on a brand-name version, it can lead to a costly legal battle that may end up with a lost patent for the brand-name drug.
Knowing this, drug companies will offer to pay their generic rivals a significant sum of money in exchange for delaying the release of their lower priced, generic drug. Both companies profit from the scenario, but consumers lose out by having to continue to pay drug prices that are essentially fixed by the pharmaceutical companies themselves.
There is now a bill pending in the Senate that would essentially ban pay-for-delay schemes because they are both illegal and anticompetitive, but it remains uncertain whether the bill will actually pass -- an atrocity considering how much money is being wasted by allowing pay-for-delay to continue.
According to the Federal Trade Commission, ending the practice would save consumers at least $3.5 billion a year, while the Congressional Budget Office stated banning pay-for-delay would reduce the federal deficit by $2.6 billion in the next 10 years.
Drug Companies Get to Name Their Price with Very Little Competition
Drug prices are rising at more than twice the rate of inflation, and the prices of the most heavily prescribed drugs are routinely raised, sometimes several times a year. Some medications have a mark-up of 1,000 percent over the cost of their ingredients.
In any other industry, price hikes of 100 percent or 1,000 percent simply would not be tolerated. But the drug companies are largely insulated from the supply-and-demand cycle that drives costs for other consumer goods.
For one thing, drug companies have the upper hand in negotiating prices. There are currently no scientific standards for analyzing the cost-effectiveness of new drugs, and this can be so widely interpreted that just about any price can be justified and consumers have no way to gauge whether the effects of a drug are worth the price.
Plus, there is very little competition for drugs sold in the United States. In addition to drug companies paying off their competitors to keep prices high, Americans are warned not to get their drugs from other countries where prices are far less expensive. The FDA went so far as to tell Americans not to buy prescription drugs from Canada because they might be "contaminated by terrorists."
As a result, Americans spend 10 times the amount on drugs that people in, say, Canada do.
And please don’t fall for the drug companies' marketing hype that drug costs are rising to cover their extensive research and development phase.
Their prices are negotiated in secret and the outcome is based largely on the bargaining power of a particular country or health plan. This means that when drugs are sold to consumers, there is not usually one set price. Prices vary from very low to very high and the price you are charged depends on a number of factors, including the country in which you reside and whether or not you have health insurance.
Americans without health insurance, who are often in low-income brackets, are often charged the most.
And, because businesses must dedicate ever-increasing amounts of their finances to rising insurance costs driven in large part by pharmaceuticals’ exorbitant prices, it affects our economy -- and you -- at nearly every turn.
Why is Government Continuing to Protect Big Pharma at YOUR Expense?
The bill currently lingering in the Senate that could put an end to pay-for-delay practices that are costing consumers billions of dollars a year has been on the table for some time … but so far it’s never made it to final passage because of the pharmaceutical industry’s intense lobbying power.
This is a pattern that the U.S. government seems more than willing to uphold.
Last year, a behind-the-scenes deal negotiated by the Senate Finance Committee essentially limited drug companies’ share of costs of national health care reform to a total of $80 billion over 10 years. Meanwhile, the White House agreed to oppose any congressional efforts to use the government's leverage to bargain for lower drug prices or import drugs from Canada or Europe!
Why are drug companies able to make deals with the government?
Because of their extreme financial power. Remember, they are the leading lobbyists in Washington, spending more to sway legislation than any other industry.
The pharmaceutical industry spent $1.5 billion lobbying Congress in the last decade, and in so doing has manipulated the government’s involvement with medicine and secondarily reinforced our dependence on them, through government policies.
You Don’t Have to Stand for Drug Company Price-Gouging
Most of you know that I rarely recommend pharmaceuticals, and in fact my mission is to transform the existing medical paradigm from one addicted to pharmaceuticals, surgeries and other methods that only conceal or remove specific symptoms -- with morbid results to our health and economy -- to one focused on treating and preventing the underlying causes.
With that in mind, I urge you to take charge of your own health now instead of handing it over to the drug companies.
Keep in mind that many of the best ways to improve your health are very inexpensive; some are even free. By adhering to basic health principles you will help your body to stay strong and heal itself without the need for expensive and dangerous drugs, so first and foremost I encourage you to live your life according to these basic health tenets.
However if, for whatever reason, you are still taking some prescription drugs, the notion that you must buy them in the United States is false. You can save up to 50 percent off the cost of drugs by purchasing them through foreign pharmacies like the ones in Canada, and you can search for these pharmacies easily using the Internet.
Typically in the U.S. Costco will have some of the least expensive prescription drugs. Keep in mind, also, that in some cases you may be able to purchase a generic drug for less if you don’t use your insurance. This is especially the case if you have prescription drug co-pays that cost more than the prescription itself.
Always ask the pharmacist to give you the cost of drugs both with and without your insurance factored in to be sure you’re getting the best price possible.