Price gouging – charging obscene markups on life-saving medications affects more than just U.S. health care consumers, even though they get the direct brunt of it. Nor are U.S. pharmaceutical companies alone in this egregious practice. Recently, a Canadian drug maker found itself facing accusations in the UK for overcharging the country’s National Health Service. While this didn’t directly affect individual patients in Britain (who get their medications at low or no-cost), the actions of this company and others has essentially been stealing from Her Majesty’s subjects, whose taxes support the NHS.
According to the UK government’s Competition and Markets Authority (CMA), Ontario-based Concordia International has violated the nation’s competition law by using its market position in order to jack up the price of their products. Specifically, Concordia raised the price of an important thyroid medication by a whopping 6000%. Because of this, the cost to the NHS for a single pill went from 16p (about .20¢) to £9.22 (over $12.40 USD) in a matter of months. That action has cost British taxpayers over £34 million ($45 million USD) over the past year.
Of course, Big Pharma continues to insist that they must charge such larcenous prices because of the cost of research and development as well as the expense of clinical trials (which are always a gamble). However, they fail to acknowledge that much of the initial research is conducted at public universities at taxpayers’ expense. They also raise prices on drugs to which they simply bought the rights, as was the case a few years ago with infamous “Pharma Bro” Martin Shkreli (currently known as “Inmate #87859-053 at Metropolitan Detention Center in Brooklyn, New York, awaiting sentencing for securities fraud).
This is the case for Concordia. Private equity backers bought and paid for the drug, without having invested in any clinical research or product development. Beyond that, the medication hasn’t cost the company one dime (or shilling). Unfortunately, drug pricing laws in the UK apply only to brand-name medications, not generics. The assumption is that once a medication becomes available in generic form, it will be up against stiff competition from similar products by rival manufacturers. However, when it comes to so-called “orphan” drugs – those designed to treat extremely rare conditions and/or are prescribed to very few patients – many pharmaceutical companies have little or no incentive to develop alternatives.
Concordia’s liothyronine treatment is one example. According to the CMA, the company took unfair advantage of the situation in order to impose a steep price increase on the NHS.
There is certain to be a legal battle over the CMA’s accusation, and there is a great deal at stake for Concordia. Currently, the Canadian drugmaker has debts totaling over $3 billion USD. The CMA can also impose a fine on the company of up to £81.6 million (approximately $109 million USD). The silver lining for Concordia is that while Her Majesty’s government enacted a law this year to prevent pharmaceutical companies from raising the price of generic drugs, that law does not take effect until next year.
At least, the CMA’s actions will discourage other Big Pharma price gougers in the future.