This is becoming the year of the health care “hot potato,” as various players in the market battle over who is the villain. The Senate Finance Committee kicked off 2019 with hearings aimed at getting to the root of soaring prescription drug prices and identifying bad actors. Suggested solutions ranged from banning price spreading to reforming rebate programs. Yet eluding the committee’s focus was the quality of the drugs on the market.
Throughout my dozen years of service as a member of Congress, including a decade on the Ways and Means Committee that shares jurisdiction over prescription drugs, I generally favored the availability of generic pharmaceuticals in the marketplace. After all, we were told that generics would help lower the costs of prescription drugs, increase competition, and spur additional research. But in recent months, serious warning signs reveal some foul play among some generic companies that threaten taxpayer wallets and American lives.
Media headlines focus on the obvious dangers of foreign drug cartels. However, troubling dangers also lurk within our domestic borders as some generic conglomerates allegedly conspire to stretch consumers’ wallets to obtain many basic drugs. Just last year, a probe of alleged price-fixing involving at least 16 companies and hundreds of generic remedies was publicly exposed. Connecticut Assistant Attorney General Joseph Nielsen called it “likely the largest cartel in the history of the United States.”
Companies allegedly engaged in price-fixing one older drug used to treat asthma symptoms. The price skyrocketed from 13 cents per tablet to more than $4.70 — more than a 3,400 percent increase. We don’t know the precise estimates of these alleged overcharges industry-wide, but since the generic drug market totaled $104 billion in sales during 2017, it’s obvious that even a small price markup could result in billions of dollars in costs to taxpayers, insurers and patients. Unfortunately, this is just the tip of the iceberg.
Data integrity and security issues among some generic drug companies are rampant, at home and abroad. In 2017, German health care company Fresenius SE made a $4.3 billion takeover offer for one generics manufacturer. Before carrying out the deal, Fresenius consultants reviewed the company’s business practices and protocols; they allegedly uncovered issues with drug production, quality control and drug-testing data at multiple manufacturing sites. During later court hearings, Fresenius’ lawyer noted the “lack of awareness of compliance issues” and said “there were so many gaps in their data management controls that it was hard to imagine how they could keep track of any data or how there could be any confidence in the data that was being kept.”
Such troubling conduct extends around the globe, as some drug companies outsource to India and China for reduced operation and production costs. In fact, India is the world’s largest exporter of generic drugs, manufacturing almost 40 percent of all newly FDA-approved generics through October 2018. But because of understaffing of foreign Food and Drug Administration inspectors, scrutiny is sporadic and questionable manufacturing practices are easier to conceal.