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Help is on the way: Federal lawsuit accuses generic drug makers of using “code” to fix price increases

U.S. and Canadian Prices of Some Generic Drugs with U.S. Prices That Recently Increased by 1000% or MoreRepresentatives of some of the nation’s largest generic drug manufacturers used code words to collude with competitors to divvy up market share and coordinate price increases according to a federal lawsuit.

The code words were used in internal emails highlighted in the lawsuit filed last month by attorneys general from 43 states and Puerto Rico. The 510-page federal lawsuit was released in full Monday. The lawsuit says the representatives used phrases like “playing nice in the sandbox” and “fluff pricing” in emails to one another.

Tyrone’s Commentary:

This is good news for self-funded employers. It’s already difficult enough to run a cost-effective pharmacy benefit plan, but doubly so when the cost for 85% of those prescriptions have been unfairly manipulated. This is a slam dunk for the feds and will bring welcomed cost-relief for self-funded employers. That is if self-funded employers take more control over plan design and achieve 89% or better GDR (generic dispense rate). 

89% is the national average GDR when both public and commercial plans are considered. For every 1% increase in GDR,  a plan should realize a 2.5% drop in gross pharmacy costs. When your plan’s GDR is 81%, 82% 83%…you are not running a cost-effective pharmacy benefit. Instead, you are paying for the non-fiduciary PBM’s bloated payroll, dividends and corporate jets.

Michigan Attorney General Dana Nessel said unredacted emails included in the lawsuit shows proof the manufacturers knew what they were doing in an effort to inflate prices. “This evidence demonstrates that these drug manufacturers knew exactly what they were doing, knew their actions were illegal, and deliberately and methodically conspired to fix prices and allocate market shares for drugs that our residents rely on every day,” Nessel said in a statement.

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Tyrone Squires, MBA, CPBS

I am the proud founder and managing director of TransparentRx, a fiduciary-model PBM based in Las Vegas, Nevada. We help health plan sponsors reduce pharmacy spend, by as much as 50%, without cutting benefits or shifting costs to employees.

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