The Pharmas Against The Consumers

“Gaming The System” May Get Its Day In Court

A new antitrust suit alleges Forest Laboratories is gaming the prescription drug market. The case might shine new light on how “product hopping” costs consumers billions: Prescriptions cost more when pharmas find ways to block lower-cost generics—plus health care costs are increased to the tune of an extra $700 million. * All of that adds up to billions in padded prices and profits for pharmas.

Here is how the game works: Near the end of a drug’s patent life, a pharmaceutical company brings out a newer form of the drug with marginal medical value but with marvelous market power that coincidentally or intentionally blocks development of a lower cost generic drug. The economic result is that existing and new patients pay more for a new but not necessarily better product. The questions are: Is the new model’s timing intentional market manipulation at the antitrust level? If so, will Forest Laboratories (newly acquired by Actavis) dodge the bullet and settle out of court to avoid bad publicity and a bad precedent?

The New York State Attorney General, Eric Schneiderman, filed the antitrust suit on Monday (Sep 15) regarding the introduction of Namenda XR, the new version of Namenda, a drug for patients with Alzheimer’s. Namenda XR starts a new patent life, the old Namenda is retired and Namenda generics hop away, extending big profits for years to come.

There are other picturesque names for this industry practice. In addition to “product hopping”, the PBS NewsHour says industry execs call it the “hard switch.” I would add “planned obsolescence” and “price fixing.”** No matter what it is called, if it is gaming of the anti-trust variety, will the penalties be painful enough so consumers start winning a game or two?


*For more on this story, see Andrew Pollack’s in-depth article, New York Files an Antitrust Suit Against the Maker of an Alzheimer’s Drug, New York Times Business, page B3, 16 Sep 2014 or use the link below.

New York Files an Antitr#670570

**Each of the four terms is herewith qualified for inclusion in my Corp-Speak Glossary.


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