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Where Does It Say the Supreme Court Has the Constitutional Power to Hike Medicine Prices to 5x Their Cost?

March 30, 2013 in Blogs

By David Dayen, Salon.com

The Supreme Court oral arguments on marriage equality deserved all the attention they received — but it’s another case heard this week that will affect even more people over the course of their lifetimes. And it could cost Americans millions in prescription drug bills.

The case falls within a sadly predictable continuum for the Roberts Court, which virtually always sides with the corporate litigant over the government or individual. This time, the arguments in FTC v. Actavis revolve around an insidious tactic common to the nation’s largest drug companies, and known as “pay for delay.” As a result of the likely ruling in this case, drug companies will be able to charge consumers as much as five times the potential cost of their products. And both government regulators and consumers will watch helplessly as pharmaceutical companies bribe generic drug makers to retain their exclusive holds on the lifesaving medicines we all inevitably require.

The first thing to know here is that U.S. pharmaceuticals get a very good deal from the federal government. For every new drug they produce, they get rewarded with long-term patents that grant them exclusive rights to market and sell the product for as much as 20 years – which guarantees them billions in profits and no competitors in the marketplace. Drug companies claim that they must be allowed to profit off of products they nurtured with expensive research and development. In reality, taxpayer-funded research from academia or the National Institutes of Health account for the vast majority of vital drugs brought to market every year, and R&D is a small fraction of the overall drug company budget. What’s more, drug companies routinely use their monopoly power to jack up pharmaceutical prices, which cost far more in the U.S. than anywhere in the world.

Congress tried to deal with this problem as far back as 1984. The Hatch-Waxman Act accelerated the FDA approval process for generic drugs, essentially copies of the brand-name products. Typically, generics sell at a much lower price – in most cases by 80-90 percent, which obviously makes them quite popular. So the introduction of a generic drug basically …read more

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