DOSE OF REALITY: BIG PHARMA TARGETS MERGERS AND ACQUISITIONS TO KEEP PRICES HIGH, EXTEND MONOPOLIES AND BOOST PROFITS
FTC Workshop Can Highlight How Brand Name Drug Companies Employ Anti-Competitive Tactics to Game the System — Driven by Focus on Profits Over People
This week, the Federal Trade Commission (FTC) is scheduled to host a two-day workshop titled, “The Future of Pharmaceuticals: Examining the Analysis of Pharmaceutical Mergers,” where experts from the FTC and U.S. Department of Justice’s Antitrust Division are set to examine “new approaches to enforcing the antitrust laws in the pharmaceutical industry” as well as “how conduct by pharmaceutical companies affects merger analysis.”
The workshop provides an opportunity to highlight how Big Pharma games the system to undermine competition from more affordable alternatives to brand name prescription drugs — including through mergers targeting blockbuster drugs and a wide array of anti-competitive tactics.
Pandemic Merger & Acquisition (M&A) Activity
- A report from JD Supra found that in 2021, despite the ongoing COVID-19 pandemic, Big Pharma companies participated in 90 M&A deals – an increase over both 2020 and 2019 – and that the deals totaled $108 billion.
- An earlier report from Evaluate Vantage found that Big Pharma shelled out nearly $130 billion on M&A in 2020, with deals announced by AstraZeneca, Gilead and Bristol-Myers Squibb.
- The biggest deal of 2020 was AstraZeneca’s $39 billion dollar bidfor Alexion Pharmaceuticals, while Gilead was responsible for two separate deals, shelling out a combined $26 billion for Immunomedics and Forty Seven, Inc.
In several other recent blockbuster M&A deals, Big Pharma companies with histories of price-gouging and engaging in anti-competitive tactics to undermine more affordable alternatives have joined forces.
AstraZeneca & Alexion
In 2020, Big Pharma giant AstraZeneca announced plans to acquire rare disease drug maker Alexion Pharmaceuticals in a $39 billion merger. Both companies are notorious for launching price hikes and price-gouging consumers while engaging in anti-competitive tactics that block competition. Here are just a few examples of AstraZeneca’s egregious behavior:
- AstraZeneca Was One Of Several Companies To Participate In Big Pharma’s Biennial Price Hikes In 2020 – despite the unprecedented economic uncertainty facing millions of Americans grappling with the pandemic – by increasing prices on 18 drugs, including on popular cholesterol drug Crestor and blockbuster drug Symbicort. (Tori Marsh, “Live Updates: July 2020 Drug Price Increases,” GoodRx, 8/3/20)
- In Anticipation Of Generic Competition For Its Blockbuster Anti-Ulcer Drug Prilosec, AstraZeneca, “Introduced And Pushed Doctors To Prescribe” A New Drug “Which Was Only Slightly Chemically Different From Prilosec But Had 13 Years Of Patent Protection Left.” The Report Estimates The One-Year Cost Of This Product Hop To Be Almost $2.4 Billion. “The anti-ulcer drug Prilosec was, at one time, the top drug by sales in the United States. In 2000, before its scheduled patent expiration the following year, Prilosec sales reached $4.1 billion (NIHCM Foundation, 2001). In anticipation of generic competition for its blockbuster product, AstraZeneca, Prilosec’s manufacturer, introduced and pushed doctors to prescribe its new anti-ulcer drug, Nexium, which was only slightly chemically different from Prilosec but had 13 years of patent protection left. A lawsuit alleging that AstraZeneca engaged in anticompetitive behavior with Prilosec and Nexium was dismissed in early 2008 when a district court found that AstraZeneca “did not eliminate consumer choice” (Callan, 2015). But antitrust experts have pointed out that the court’s reasoning ignores “the realities of drug markets,” where a prescription for a single-source brand drug removes the option of a generic version (Carrier and Shadowen, 2016).” (Alex Brill, “The Cost of Brand Drug Product Hopping,” Matrix Global Advisors, 9/20)
- As AstraZeneca Faced Generic Competition To Its High Cholesterol Drug Crestor, Its “Price Was Increased Several Times Before The Generic Came Out … Including By About 15 Percent Right Before.” “AstraZeneca’s AZN, -0.08% drug Crestor, another of the drugs featured in the report, is a popular but expensive drug that treats high cholesterol. In 2016, when the drug first got a new generic rival, the branded product cost about $300 a month without insurance coverage. The price was increased several times before the generic came out … including by about 15% right before. (AstraZeneca said it could not comment because it was not involved in the study.)” (Emma Court, “Big Pharma Games The System To Make Generic Drugs More Expensive,” MarketWatch, 8/3/18)
- AstraZeneca’s Pricing Strategy Served To Create “A New, Higher Baseline Price When The Generic Hits The Market.” (Tori Marsh, “Prices For Brand Drugs Spike Before A Generic Is Released. Here’s Why.,” GoodRx, 7/27/18)
- After Increasing Drug Prices By As Much As Nine Percent, On A 2018 Earnings Call, Soriot Insisted The Company Was “Sensitive” To Drug Pricing Concerns And Said It Had Raised “Wholesale Prices Earlier [That] Year By ‘Very, Very Modest’ Amounts.” “During an earnings conference call, the AstraZeneca chief executive disclosed the company would not raise prices in the U.S. for the rest of year. Other drug makers have taken the same step in response to pressure from the Trump administration, but he insisted this was ‘our plan … all along’ … He maintained AstraZeneca was sensitive to the problem by raising wholesale prices earlier this year by ‘very, very modest’ amounts, ‘between 1 and 3 percent’ which, he said, was ‘in line with inflation.’” (Ed Silverman, “When Modest Is Actually Excessive: AstraZeneca Spins Its Price Hikes,” STAT News, 7/26/18)
Alexion has a history of price-gouging products, developed with the help of public investment, used for the treatment of rare diseases:
- At $500,000 A Year, Alexion’s Rare Disease Medication Soliris Is “One Of The World’s Most Expensive Drugs In The World.” (Alexander Urry, “Ultomiris: Can Drug Innovation Be Too Expensive?” STAT News, 3/1/19)
- “Most Of The Research And Development [For Soliris] Was Done By University Researchers Working In Academic Laboratories Supported By Public Funds.” (Kelly Crowe, “How Pharmaceutical Company Alexion Set The Price Of The World’s Most Expensive Drug,” CBC, 6/25/15)
- “The Extreme Price Of Soliris Also Can’t Be Explained By The Manufacturing Costs.” “The extreme price of Soliris also can’t be explained by the manufacturing costs, he went on, because monoclonal antibodies are much less expensive to make than people think … In other words, Alexion set the price of Soliris at half a million dollars a year, because that’s what it thinks the market will bear, based on the fact that the drug works and patients have no other treatment options.” (Kelly Crowe, “How Pharmaceutical Company Alexion Set The Price Of The World’s Most Expensive Drug,” CBC, 6/25/15)
AbbVie & Allergan
In another blockbuster Big Pharma M&A deal, in 2019, Big Pharma giant AbbVie announced plans to acquire drug maker Allergan in a $63 billion merger. Here are a few examples of how the two companies have engaged in anti-competitive tactics and price-gouged consumers:
- From 2012 to 2018, AbbVie Doubled The List Price Of Its Top Selling Drug Humira From $19,000 To $38,000. (Danny Hakim, “Humira’s Best-Selling Drug Formula: Start at a High Price. Go Higher.,” The New York Times, 1/6/18)
- AbbVie Increased Its $20 Billion Blockbuster Drug Humira By 6.2 Percent Just A Couple Of Months After Settling Lawsuits To Keep Generics Off The Market Until 2023. “AbbVie increased by 6.2 percent the list price of its blockbuster rheumatoid arthritis treatment Humira, which is on pace to record about $20 billion in sales in 2018.” (Michael Erman, “Drug Companies Greet 2019 With U.S. Price Hikes,” Reuters, 1/2/19)
- Originally Set To Lose Patent Protection In 2014, AbbVie Has More Than Doubled The Span Under Which Its Blockbuster Humira Is Covered, With The Latest Expiration Now In 2034. “The company listed 22 patents for various diseases or methods of treatment, 14 on the drug’s formulation, 24 on its manufacturing practices, and 15 ‘other’ patents. The latest expiration date is 2034 – providing more than double the protection span a drug such as Humira might normally expect.” (Cynthia Koons, “This Shield Of Patents Protects The World’s Best-Selling Drug,” Bloomberg Businessweek, 9/7/17)
Leading up to the deal, Allergan had been steadily increasing prices of their drugs, too, while abusing the patent system keep prices high:
- In 2019, Allergan Has Already Increased The Price Of 140 Drugs At An Average Percent Change Of 8.1%. (“Get The Facts On Brand-Drug Price Changes,” 46brooklyn, 5/27/19)
- On January 1st, 2018 Allergan Raised The Price Of 75 Drugs — Nearly Its Entire Portfolio. The Majority Of These Drugs Were Raised By 9.5 Percent. (Joe Nocera, “How Allergan Continues to Make Drug Prices Insane,” Bloomberg, 1/9/19)
- When The Patent For Asacol HD Was About To Expire, Allergan Sued A Generic Drug Maker And Cut A Deal That Would Allow Them To Reap Over 75 Percent Of The Generic’s Profits – Limiting Competition And Keeping Prices High. (Joe Nocera, “How Allergan Continues to Make Drug Prices Insane,” Bloomberg, 1/9/19)
- Allergan Tried to Use A Backhanded Scheme To Skirt The U.S. Patent System By Selling Its Patent On Restasis To A Native American Tribe In Exchange For The Exclusive Right To Continue Manufacturing And Marketing The Drug. “In September 2017, Allergan transferred patents for the eye drug to the [Saint Regis Mohawk] tribe in upstate New York near the Canadian border. Allergan paid the tribe $13.75 million up front and agreed to pay up to $15 million a year in royalties as long as the patents remained valid. At the same time, the tribe gave Allergan ‘the sole and exclusive right’ to manufacture and market the drug in the United States for uses approved by the Food and Drug Administration.”(Robert Pear, “Indian Tribe Joins Big Pharma at the Supreme Court, Defending a Lucrative Deal, New York Times, 1/26/19)
The deals are only a glimpse at the breadth of the industry’s tactics that limit competition and drive prices higher for consumers. Over time, Big Pharma’s anti-competitive tactics have cost consumers and taxpayers big.
Anti-Competitive Practices Cost Consumers Big
Big Pharma’s anti-competitive behavior, including tactics like product hopping and patent-thicketing, delay more affordable alternatives from coming to market and cost patients and our health care system billions of dollars. The American public faces unsustainable costs because of this anti-competitive behavior.
- A 2021 report from AARP found that total Medicare Part D spending on 50 top brand-name drugs was $38 billion higher between 2015 and 2019 than it would have been if drug manufacturers had not increased their prices faster than the corresponding rate of inflation.
- A May 2021 report found delayed alternatives to AbbVie’s blockbuster drug Humira will cost the U.S. health care system an estimated $19 billion by 2023.
- A July 2020 report estimates patent gaming around Imbruvica will cost the U.S. health care system $41 billion.
- And a September 2020 study found Big Pharma’s biologic patent abuse will cost patients an additional $25 billion by 2029.
Patent Abuse Delays Access to Lower Cost Alternatives
A 2021 report from the U.S. House Committee on Oversight and Reform found that companies responsible for just 12 of the best-selling drugs in Medicare obtained more than 600 patents, effectively blocking competition from more affordable alternatives for decades.
- In fact, the Committee report states that the patents already secured for these 12 drugs, “could potentially extend their monopoly periods to a combined total of nearly 300 years.”
In addition, a September 2020 study from Avik Roy and Gregg Girvan of the Foundation for Research on Equal Opportunity (FREOPP) found that ballooning spending on U.S. prescription drugs is being particularly driven by Big Pharma’s abuse of the patent system to undermine biologic and biosimilar competition.
- One way Big Pharma is able to maintain monopoly power is through ‘patent thickets.’ By seeking a multitude of patents for marginal aspects of a biologic, brand name drug companies are able to create a ‘thicket’ of patents that can dramatically extend exclusivity periods — blocking cheaper generics, or biosimilars, from coming to market.
- Another way Big Pharma maintains monopoly power is through ‘submarining’ and ‘evergreening,’ in which a branded drug maker purposefully delays the filing and issuance of a patent in order to extend market exclusivity of drug for as long as possible.
- Without action, the study’s authors estimate the anti-competitive nature of the biologic drug marketplace will cost American patients more than $30 billion from 2015-2029.
Business As Usual for Big Pharma
Unfortunately, engaging in anti-competitive tactics is a time-honored tradition for Big Pharma. Pharmaceutical companies abuse the patent system by deploying a host of other anti-competitive tactics – including ploys like co-pay coupons, ‘charitable’ kickback schemes and patent abuse – to prevent patients from accessing more affordable alternatives:
- Patent Abuse: Big Pharma has a long history of price gouging American patient through patent abuse schemes, like patent thicketing and product hopping, to hinder generic competition and maintain monopolies over their biggest money makers.
- ‘Charitable’ Kickback Schemes: It’s no secret that Big Pharma employs a number of shady tactics in order to keep prices high. Recent reports show how brand name drug manufacturers game the system by using industry backed ‘charities’ to provide kickbacks in the form of copays to doctors and patients to quell concerns over sky-rocketing prices.
- Co-pay Coupons: Brand name drug manufacturers have long used co-pay coupons to drive patients towards their expensive drugs and away from cheaper alternatives under the guise that they are helping patients afford their prescription medications. This scheme keeps health care costs high for patients and taxpayers.
Read more about how Big Pharma’s patent abuse blocks competition, harms consumers and contributes to ballooning taxpayer spending HERE.
Read more on why Big Pharma’s tired argument that innovation justifies their out-of-control prices doesn’t hold up to scrutiny HERE.
Read more on market-based solutions to hold Big Pharma accountable and lower prescription drug prices HERE.