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How generic drug makers are responding to price-fixing lawsuit

U.S. consumers often turn to generic versions of prescription drugs to keep costs down, but dozens of states are now suing manufacturers of these drugs, saying they illegally fixed prices and divided up market share. Affected drugs include medicines used to treat everything from minor infections to HIV. John Yang gets reaction from Chip Davis, CEO of the Association for Accessible Medicines.

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  • John Yang:

    The drug companies named in the lawsuit have strongly denied any wrongdoing and have pledged to vigorously defend themselves in court.

    Chip Davis is the chief executive officer of the trade group that represents the makers of generic prescription drugs, the Association for Accessible Medicines.

    Mr. Davis, thanks so much for joining us.

  • Chip Davis:

    Thanks for the opportunities to be here.

  • John Yang:

    You heard what the attorney general said, largest corporate cartel in history, overt, brazen collusion.

    What's your response?

  • Chip Davis:

    Yes. Again, well, thank you for having me.

    My initial response to what General Tong said is that facts are important here. Conjecture isn't. Speculation isn't. Trying a case in the court of public opinion that should be tried in the courts is not the way to ensure that patients have access to safe, affordable, and effective medicine.

    You even referenced in your introduction with the general that nine out of every 10 prescriptions in the United States are now generic. We just released on behalf of our members a report that says that 90 percent of all prescription drugs are available for only 22 percent of total cost to the health care prescription drug dollar.

    That's an amazing value proposition that you can't see anywhere else in health care. So to suggest that an entire industry is engaged in some sort of corporate criminal cartel is not just a disservice to the industry. It's a disservice to the patients who rely on the industry.

  • John Yang:

    But he also pointed out that some of the data that the industry has pointed out showing the decrease in generic drug prices…

  • Chip Davis:

    Sure. Yes, we put that out.

  • John Yang:

    … that there was a spike. There was a spike from 2012 to 2014, which is the period they're talking about that this activity took place.

  • Chip Davis:

    Well, in your interview, what I saw, it was very hard to tell if General Tong was talking about present day or a time period that you just referenced, which the 2011-to-'14 time frame.

    Full candor, that preceded my time at the association. When I came, it was Generic Pharmaceutical Association. We're now AAM.

    But here's what I will tell you. The reference and the example he uses, because it's the drug he's on, doxycycline, he talks about a price increase back in that time frame that had a significant percentage price increase.

    Now, remember, percentage price increases off of a low cost look different than a small percentage over a high-priced biologic drug.

    But do you know what the cost of doxycycline is today? Fourteen dollars for a 30-day supply. He conveniently and the other attorney generals conveniently leave out the fact that there have been 37 straight months of generic price deflation in this industry, in part because of the evolution and the consolidation of health care buyers.

    This industry is actually facing real sustainability challenges. They aren't focused on colluding with each other. They're trying to figure out a way that they can sustain their business operations, so that patients can continue to benefit from the drugs that they provide.

  • John Yang:

    What about getting back to some of the specifics of what Mr. Tong had to say?

    He said he has — that they were able to subpoena in their investigation text messages, in which discussions about price increases and the response by a particular manufacturer, and then the response by the other manufacturers that we will go along, we will play nice?

    They talk about accepting their fair share, rather than competing.

  • Chip Davis:

    Well, I can't comment on any of the specifics of the investigation. AAM is not a party to it.

    What I will stipulate too is that these are serious allegations. And if there is any evidence of anti-competitive behavior by a small subset of the industry, then that will ultimately be borne out and those individuals and the companies they work for will be held to account.

    But he talked about — roughly about 100 drugs, if my memory serves me correctly. On any given day, there are over 2,000 generics on the marketplace. So that's — that's 5 percent of the total number of generics on the marketplace today, and a smaller percentage of the total of 10,000 generics that have been approved by the Food and Drug Administration over the years.

    So, this effort in the public domain to cast an entire industry, where — and I have heard him say that people wake up every day, go to their place of business and commit crimes — I think that's actually, with respect to the general, an irresponsible statement.

    The members that I know and the people that work there get up every day with one mission in mind. They want to make sure that they can go and produce safe, high-quality, effective medicines at a price that patients can afford.

    There's no way you're 90 percent of scripts and 22 percent of total costs unless that is your mission, pure and simple.

  • John Yang:

    Chip Davis, CEO of the Association for Accessible Medicines, thank you very much.

  • Chip Davis:

    Thank you for your time.

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