Washington, D.C. — The American Economic Liberties Project and I-MAK today released “The Costs of Pharma Cheating,” a blockbuster report that reveals rampant antitrust violations by Big Pharma corporations are costing American patients and government health programs an additional $40 billion on branded pharmaceuticals in 2019.

“American families are paying far too much for prescription drugs, in large part due to rampant corporate lawlessness,” says Erik Peinert, Research Manager and Editor at the American Economic Liberties Project. “From illegal pay-for-delay agreements to PBM kickbacks and killer acquisitions, this report documents the many ways Big Pharma is manipulating and breaking the law to expand corporate profits at the expense of patients and taxpayers. The Federal Trade Commission has begun fighting back, but it needs more assistance from Congress and other agencies to crack down on these illegal practices and deliver for patients.”

“The patent system is at the root of enabling many of the antitrust violations we identified and which are leading to higher drug prices,” says Tahir Amin, an Executive Director of the Initiative for Medicines, Access & Knowledge. “Until Congress and the United States Patent and Trademark Office ensure stricter standards that would prevent the granting of many of the types of patents that are leading to these violations in the first place, Americans can expect to see their drug prices continue to rise.”

Drugs prices are high in the United States, and many are getting more expensive. Out of 1,216 drugs whose price increases surpassed inflation from July 2021 to July 2022, the average price increase was 31.6 percent, and a 2021 poll by Gallup found that 18 million Americans – 7 percent of adults – were unable to pay for medications prescribed to them by a doctor. Voters consistently show anger about the high and rising cost of drugs in the United States.

This research demystifies one central driver of this trend: the illegal and anticompetitive tactics used by the pharmaceutical industry to perpetuate monopolies—in the form of government-backed patents over brand drugs—and block competition from more affordable generic drugs. In total, Economic Liberties and I-MAK identified 10 overlapping strategies used by the pharmaceutical industry to illegally prevent competition and keep drug prices high: horizontal collusion, pay-for-delay or reverse payments, no-generics agreements, patent abuse, product hopping and patent evergreening, sham citizen petitions, sham orange book listings, REMS abuse, exclusionary rebates, and acquisitions of monopolies.

In total, Economic Liberties and I-MAK estimate that cost to final payers for these antitrust violations was $40.07 billion in 2019 alone. This implies an average cost of about $120 in 2019 for every American, solely because of antitrust violations by the pharmaceutical industry.

The report offers a series of policy recommendations to empower antitrust enforcers to rein this abuse and prohibit these tactics, including:

• Pay-for-delay agreements between brand and generic manufacturers should be completely prohibited. Legislation should subject such agreements to a complete per se ban.
• FDA regulations should be reformed to prohibit drug manufacturers from listing device-only and REMS patents in the FDA Orange Book.
• To prevent product-hopping, FDA procedures should be reformed to treat generics as substitutable equivalents to minimally adjusted versions of branded drugs.
• Dramatically increase funding and resources to antitrust enforcers to tackle the problem of repeated pharmaceutical antitrust violations.
• Restrict laws around pharmaceutical patent eligibility, including the Noerr-Pennington doctrine, to ensure that drug companies cannot use bad-faith patent strategies to perpetually extend monopolies without creating useful enhancements to existing drug products.
• Develop sophisticated systems to identify likely antitrust violations from public data and intervene before patients and payers are harmed.
• Increase penalties for corporations and individuals engaging in antitrust violations to better deter such conduct.
• Empower the Justice Department and state attorneys general to recover damages on behalf of public health programs, such as by filing follow-on cases to private litigation.

Read “The Cost of Pharma Cheating.”

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.