When Competition Saves Lives

Putting an end to pharmaceutical monopolies

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Illustration by Rose Collins

In most cases, when a product is too expensive, consumers seek out cheaper alternatives, using generic versions of brand name goods. Competition is supposed to prevent brands from overcharging  customers. 

But what if alternatives are being kept off the market? What stops a company from listing their goods at remarkably high prices? Until recently, nothing.

The steep cost of lifesaving medication is abhorrent to many, but surprising to few. Anyone experiencing chronic illness that requires regular medication knows firsthand the burden of pharmaceutical bills. But how do dominant companies maintain such outrageous prices?

Since the early 1990s, pharmaceutical companies have engaged in an unregulated practice called “pay-for-delay.” This scheme begins with brand name drug producers taking lesser known companies to court. Smaller corporations produce virtually identical drugs as name brand companies, and Big Pharma argues this constitutes patent  infringement. 

But reaching a traditional settlement isn’t the objective of these court cases.

The goal is a reverse payment patent settlement, where the patent holder actually pays the alleged infringer. The catch is the payment includes an explicit agreement — the smaller brand will slow the production of its drug or delay its release. In other words, name brand companies bribe their way into a monopoly.

The result is that the smaller company gets a sizable sum of money and the larger one gets to keep cheating its customers out of fair prices. 

After decades of pay-for-delay agreement settlements nationwide, California finally took a stand against this dishonest and monopolistic behavior. On Oct. 7, Governor Newsom signed Assembly Bill 824 into law, prohibiting patent infringement settlements deemed anti-competitive and related to the sale of pharmaceutical  products. 

The bill is a monumental victory in the battle for more affordable healthcare, as well as the battle against corporate greed and companies that profit at the expense of their suffering  customers.

California Attorney General Xavier Becerra, who has fought for access to healthcare throughout his career, sponsored the bill. His office pushed back against cases of pay-for-delay earlier this year, winning nearly $70 million from companies that prevented generic versions of Provigil and Lidoderm from reaching the market.

While California became the first state to approve legislation against pay-for-delay, the matter doesn’t end here. Several settlement cases have taken place in other parts of the country and involve drug companies headquartered in various states. Until similar laws are introduced across the nation anti-competitive practices will  persist.

This is a momentous change that will improve the quality of life for many, but we cannot stop until there are no corporate interests standing between patients and their medication. We must continue raising awareness of the problematic and downright cruel practices of pharmaceutical  corporations. 

To see this law taken up at a federal level, we must urge California’s representatives in the House to speak up and introduce a similar bill using AB 824 as an  example.