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Conn. attorney general calls generic drug makers a ‘private sector cartel’

Affordable health care is a persistent concern for Americans and a topic of great political debate. Typically, generic prescription drugs offer a cheaper alternative to name brands, but a new multi-state lawsuit alleges that their manufacturers have been artificially raising prices. John Yang talks to William Tong, attorney general of Connecticut, whose office has been leading the investigation.

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  • Amna Nawaz:

    The price of prescription drugs is a pocketbook issue that affects Americans from every walk of life.

    Much of the focus has been on the cost of brand-name drugs.

    But, as John Yang tells us, a new multistate lawsuit alleges many generic drugmakers have been artificially raising the price of their medications, drugs used to treat everything from minor infections to chronic diseases like HIV.

  • John Yang:

    Amna, about 90 percent of the prescriptions filled in the United States are for generic drugs, medications whose patents have expired.

    Congress created the generic drug industry to drive prices down through increased competition. But a lawsuit filed by 43 states and Puerto Rico alleges that leading drugmakers conspired to inflate the prices of more than 100 widely used generic drugs, sometimes by as much as 1000 percent.

    Connecticut Attorney General William Tong's office has been leading the investigation. And he joins us now.

    Mr. Tong, thanks so much for joining us.

  • William Tong:

    John, thanks for having me.

  • John Yang:

    First of all, give us a sense of the scope. How much money are we talking about?

  • William Tong:

    Billions of dollars.

    We think this is potentially the largest private sector cartel in history. And what we're seeing is pervasive, widespread, industry-wide price-fixing and dividing up of market share.

  • John Yang:

    And you're alleging that some of the drugs involved are widely used. Some of our viewers may have them in their medicine cabinets right now.

  • William Tong:

    Yes.

  • John Yang:

    What are we talking about?

  • William Tong:

    So, common antibiotics like doxycycline, which I use day, Z-Packs, which we use — I use sometimes when my kids are sick. I have a 13-year-old, a 10-year-old, a 7-year-old.

    Adults use Z-Packs for bronchitis and a host of ailments. There are some simple antibiotic creams that we use, you know, when we get a cut or a scratch. These are drugs that we use every day and they're drugs at Americans rely on to live.

  • John Yang:

    And what's the evidence you have to backup your claims?

  • William Tong:

    So, we have text messages, e-mails. We have cooperating witnesses.

    And we also have phone records that show on days in which the major generic drug manufacturers increased prices, often in concert, there is a high frequency of phone calls, you know, phone calls that last for a minute, two minutes, five minutes, 45 minutes, between the major generic drug manufacture centers a highly unusual way.

    And so all of this evidence shows that there was overt, brazen collusion on price. And I guess what I would say to the industry is, what part of that is not true?

  • John Yang:

    Well, I mean, to be clear, you don't know what was said in those phone conversations. You just know that they took place.

    So what makes you suspicious?

  • William Tong:

    No, actually, we have text messages and e-mails that memorialize what happened in those phone conversations.

    We have chatter after the phone conversations in which people say, look, I talked to this guy, I talked to that guy. It seems that this company is going the raise price on this drug, and this other company is going to follow.

    It's that sort of communication, coupled together, the text messages, the e-mails, the cooperating witnesses, again, who are telling us what's happening at these companies, and then the phone records. Putting that all together shows a practice, an industry-wide practice of collusion, again, in what is the largest corporate cartel in history.

  • John Yang:

    We're going to be talking to someone from the generic drug industry after this.

    But one of the things that they have said before in response to this lawsuit is that they say that, overall, the price of generic drugs has been falling.

    How do you respond to that?

  • William Tong:

    You know, they sent out a press release, and they sent out a chart that they say shows that prices have gone down a little bit over the last three years.

    But what they don't mention is that the same chart that they put out shows there was a huge spike in prices in 2012, '13 and '14. And this is why we saw prices go up 1000 percent, 2000 percent on the drug I mentioned, doxycycline, the one I take, 8000 percent.

    And there was just no reason for a spike in prices, no market explanation. And what we found is that, during that time, these competitors were talking and they were colluding.

  • John Yang:

    You said that some of these texts memorialize the phone conversations, and they say who they talked to. But what in specific is being said this in these text messages?

  • William Tong:

    So, what they're talking about is, you know, efforts by various drug manufacturers to raise prices.

    So, on the one hand, you see communications about, you know, Teva, which is the focus of this latest complaint, and the largest generic drug manufacturer in the world, that Teva will raise prices on X-day, and another generic drug manufacturer, say, Mylan, will follow.

    And so there are overt conversations by specific manufacturers by representatives of specific manufacturers about price movements and how they are going to react to them. Also, they talk about dividing up their fair share of the market and forcing a market allocation or division of market share by playing nice in the sandbox with each other.

    So it's that kind of language that shows that there is an overt agreement to collude on price and market share.

  • John Yang:

    In addition to trying to stop this practice, is — or trying to stop these practices — is your lawsuit trying to get any other of this money back for the consumer?

  • William Tong:

    Yes. We're trying to claw back the billions of dollars that they stole from the American people through what we believe to be one of the biggest frauds ever committed on the people of this country.

  • John Yang:

    Connecticut Attorney General William Tong, thanks so much for joining us.

  • William Tong:

    Thank you, John.

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