U.S. states accuse 26 drugmakers of generic drug price fixing lawsuit
The generic drug industry in the US is pretty unique.  Thanks to the Waxman-Hatch generic drug bill in 1984, it went from really hard to get a generic drug approved in the US (you had to start from scratch) to really easy (just prove your drug is the same and use the branded drugs data for approval).<p>As a result, the generic drug industry in the US is <i>very</i> competitive.  When a blockbuster drug like Liptior goes generic, you have up to a dozen companies vying to be the first generic approved because that gets you 180 days of exclusivity (you&#x27;re the only generic, you&#x27;re cheaper, everyone switches to you).  Typically the first generic is priced around 90% of the brand name price (most of it profit), but once other generic companies get approval (after 180 days), the price drop to 5-10% of the branded drug price.  This is typically very close to the cost of manufacturing.  There are also &quot;generic substitution&quot; laws in most states that <i>require</i> pharmacists to fill prescriptions with the generic.  So once the patent runs out, the branded drug loses sales very fast.<p>As a result, the US usually has <i>lower</i> generic drug prices than the EU or Canada.[1]  And generic drugs tend to get approval very quickly after the patent expires in the US.<p>However, on the flip side, because the market is so competitive, margins are razor thin.  If you want to understand the generic drug market, read the book &quot;The First Question&quot; by Andrew Bodnar.  He was convicted by the DOJ for anti-competitive practices as a VP at BMS and wrote the book as a part of his sentencing (book is on the public record).  The quote that stuck with me was from Barry Sherman of Apotex (massive Canadian generic drug company).  It was something along the lines of &quot;I make zero profit off my drugs.  All my profit comes from winning settlements from pharma companies&quot;.<p>As a result of the razor thin margins, weird things start to happen.  The first is price fixing, as per this article.  Nobody wants to compete on price in generic markets (though that&#x27;s the only differentiator between identical drugs!) because their margins already suck.  Allegedly, these companies colluded to not drop prices.<p>The other thing that happens is companies just say &quot;screw it&quot; and drop out of the market.  Why not?  The profit margin is near zero.  This is especially true with companies selling sterile fill product (i.e. injectables).  It&#x27;s <i>really freakin hard and expensive</i> to run a sterile fill plant, so when something goes wrong, companies often just shut down the line.<p>What happens?  Drug shortages.  Prices rises.<p>Then what happens?  Some small company realizes everyone else dropped out of the market.  So they quietly get their generic approved and jack the price as high as they can.  You&#x27;ll see a drug that was $0.10 per tablet go to $10 per tablet.  Then this attracts other competitors (or sometimes it doesn&#x27;t), prices drop and the cycle starts again.<p>[1] Can&#x27;t find exact study, but here&#x27;s an FDA study comparing generic drug prices between US and Canada: <a href="https:&#x2F;&#x2F;www.fda.gov&#x2F;drugs&#x2F;resources-you-drugs&#x2F;study-us-generic-drugs-cost-less-canadian-drugs" rel="nofollow">https:&#x2F;&#x2F;www.fda.gov&#x2F;drugs&#x2F;resources-you-drugs&#x2F;study-us-gener...</a>