New prescription drugs can be life-changing, but that innovation often comes with a high price tag.
One tool for addressing those high costs is through generic drugs, which bring significant cost-savings without sacrificing effectiveness. The Food & Drug Administration found a generic drug can cost about 30% less than the brand-name drug when only one company makes it. When more companies make the generic, prices can drop by nearly 85%. But it can take many years for generics to hit the market because of big brand patent protections, clinical trials, regulatory reviews, and other issues.
Protecting our customers from practices that keep costs high is paramount for nonprofit health plans like Premera, which is why we led and won a class action lawsuit against Takeda Pharmaceuticals. Read on to find out why.
“Pay for delay” keeps consumer prices high
A little-known practice can have a big impact on the availability of generic drugs. Using a “pay for delay” strategy, a brand-name drug company will wait until their patent expires, then strike deals and create incentives for other manufacturers not to go to market with generic versions of the drug.
“Pay for delay” does nothing to improve the safety or effectiveness of generic drugs and only serves to keep affordable generics out of reach for those who need them. A study in the Journal of Health Economics estimates “pay for delay” schemes increase prescription drug costs by nearly $12 billion per year, including about $3 billion that comes directly out of patients’ wallets through higher out-of-pocket costs like copays and coinsurance.
Right now, 20% of health insurance premiums at Premera go toward prescription drugs. Monopolistic price controls like “pay for delay” schemes further increase premiums and healthcare costs for members, employers, and the broader healthcare system.
How Premera is responding
Premera represented health plans and self-funded groups across the country in a class action lawsuit against Takeda Pharmaceuticals. The case focused on Takeda’s “pay for delay” practices that kept the generic version of a constipation drug from entering the market. The cost for the brand name drug was about $6.50 per capsule, while the generic version was $0.67 per capsule.
In 2013, the Supreme Court ruled in the FTC v. Actavis case that “pay for delay” practices can violate federal antitrust law. Since that ruling, only four cases have gone to trial, and of those, this is the first case that didn’t rule in favor of the drug company. It’s a major win for affordability that impacts not only Premera members, but all Americans.
