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Prevent prescription drug monopolies

My 12-year-old daughter suffers from asthma, so when she left her inhaler at home during a family trip to Nebraska this fall, we had to replace it. I ordered a new inhaler at the local pharmacy and was shocked when the pharmacist told me it would cost $60. The charge was manageable, but the experience opened my eyes to the dangers of monopolies in the pharmaceutical industry.

When the pharmacy told me how much the name-brand version of my daughter’s albuterol inhaler would cost, I inquired about the generic. I used to work in a traditional retail pharmacy, and remembered being able to obtain the generic version for about $2. The manager informed me that there was no longer a generic albuterol inhaler available.

A few years ago, pharmaceutical companies successfully lobbied the Food and Drug Administration ( to ban traditional inhalers over fears that the chlorofluorocarbon (CFC) used as a propellant was harmful to the ozone layer. The patents on those traditional inhalers had expired, so generic versions were readily available. The ban enabled drug makers to use new propellants, which could justify a new patent for the same drug. As a result, the price went from a few dollars per prescription to $60.


A new report in the New England Journal of Medicine highlights how big the problem of high-cost generic drugs is getting. Generic drugs to treat everything from intestinal parasites to high blood pressure to depression have increased 570 percent, 2,800 percent and 5,200 percent, respectively — sometimes in as little as one year.

In 2012, the McKesson Corporation paid out $151 million to 29 states over allegations that the company artificially raised Medicaid drug prices. McKesson is the country’s largest drug wholesaler, and it was alleged that they artificially drove up prices on 1,400 drugs from 2001 to 2009.

Going forward, it looks as if things will only get worse. Bryan Birch, the chief executive of Truveris, which analyzes prescription drug prices, recently spoke to Medscape Medical News about the “unprecedented levels of generic price increases” over the last two years. “The folks who benefit from it are the manufacturers of generic drugs, the wholesalers in the United States, and the…pharmacy benefits managers,” Birch said, adding that the costs are eventually passed on to consumers.

When there is a legitimate shortage of generic drugs, the FDA can usually work to expedite companies’ ability to produce the drug, or even deal with overseas manufacturers to import more of the drug. Compounding, when a pharmacist creates a customized medication on a case-by-case basis, is another alternative for patients who need drugs that are hard to find commercially.

But the FDA cannot do the same with a single manufacturer of a drug, according to the NEJM report. “U.S. antitrust laws protect consumers only from anticompetitive strategies such as price fixing among competitors,” the report notes. “Manufacturers of generic drugs that legally obtain a market monopoly are free to unilaterally raise the prices of their products.”

I’m not begrudging pharmaceutical companies making a profit. These companies provide drugs that save lives, and they should be able to make money doing it. But these companies have become adept at extending patents, which are supposed to expire after 20 years. And as long as a company holds a monopoly, it can charge whatever it wants for a drug.

It’s assumed that drug companies have to charge high prices to fund research and development of new drugs; however, 84 percent of worldwide funding for drug discovery research comes from government and public sources. And pharmaceutical companies spend 19 times more on marketing than they do on research.

The FDA and the Federal Trade Commission, both of which oversee the pharmaceutical industry, need to work together to promote competition and remove incentives for pharmaceutical companies to monopolize. The American people are used to having a choice when they buy goods and services, from cable TV to razor blades to air travel.

One would expect that in this era of choice, there would be similar competition for the over $300 billion dollars Americans spend every year on prescription drugs. But the big pharmaceutical companies are allowed to obtain and keep monopolies, preventing the free market from operating as it should.

by Bill Goble, PharmD, a licensed pharmacist and the general manager of Brown’s Compounding Center in Englewood.

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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