CT Blue

I read Dean Baker’s blog religiously. One can argue that he is repetitive, but I think he rightly feels that he must keep repeating himself, since what he has to say, usually so obviously true when you read it, never seems to sink in. It’s not just him, of course. It’s the same for Krugman and like minded economists-you know, the ones who recognized the coming disaster before it happened.

Not a week goes by that Baker doesn’t lament our broken patent system, or in which he fails to point out that our long term budget woes are almost solely attributable to the far higher costs imposed upon us by our broken health care system.

Here’s a story in which those memes collide:

It would seem a business executive’s dream: legally pay a competitor to keep its product off the market for years.

Congress has failed to stop it, and for more than a decade generic drug makers and big-name pharmaceutical companies have been winning court rulings that allowed it.

Until this month. On July 16, a federal appeals court in Philadelphia issued a decision that the arrangement is anticompetitive on its face. It potentially sets up a confrontation before the United States Supreme Court. If it were to accept the case, the outcome could profoundly affect drug prices and health care costs.

The Philadelphia ruling by the Third Circuit Court of Appeals conflicted with decisions from at least three other federal circuit courts, giving the Supreme Court a strong reason to hear the case within the next few years.

“The Third Circuit has rebalanced the issue and teed it up for the Supreme Court,” said Eleanor M. Fox, an antitrust expert and professor at the New York University Law School. The agreements between generic and branded drug manufacturers “are cases of competitor collaboration, which the Supreme Court has called ’the supreme evil of antitrust.’ ”

The stakes are enormous for brand-name drug makers, which would face lower profits, and for pharmacies, insurance companies and patients, who could benefit from the savings.

In the case of Cipro, a powerful antibiotic with annual sales exceeding $1 billion, Bayer paid $400 million to a generic drug maker, Barr Laboratories, and other companies. In exchange, the generic makers said they would withhold their own lower-priced generic versions of the drug until 2003, when Bayer’s patent on the brand-name drug expired.

(via New York Times)

Now, if the market works as advertised, this must mean that the price of this drug, already at monopoly levels, will be increased by an amount, in the aggregate, greater than the generic manufacturer’s could make if they refused to take these payments. So, rather than forcing prices down, the existence of the generic manufacturers, who are basically now not manufacturing but getting by on bribes, results in an increase in already swollen prices in an amount greater than the savings would be if the generics were truly competing.

Why is it not surprising that the Congress has done nothing to stop this? Why, after years of court packing by Republican presidents, with only nominal pushbacks by the Democrats, is it not surprising that until now every court in the land has ruled in favor of a practice that on its face is monopolistic, price fixing behavior? Is it any surprise that the only surprise is that one court has seen the obvious?

I’ll be shocked if this ruling is upheld. It’s such a quaint throwback to that brief moment in history when this country was not a wholly owned subsidiary of corporate America.

Posted with Blogsy