From the antitrust mailbag: What can the FTC do about prescription drug price spikes?

Consumers frequently contact the Bureau of Competition to alert us that the cost of a prescription drug suddenly spiked up, and ask if the FTC can take antitrust action to bring the price back down. The answer in a nutshell is that it depends on the reason for the price change.

We’ve examined this issue a number of times and often found that price changes (up or down) are due to normal market forces and thus do not present an antitrust issue. One common cause of a sudden spike in the price of a drug is the development of a supply problem, such as an ingredient shortage. It’s a normal market event for prices to rise after a fall in supply. The U.S. Food and Drug Administration has the authority to address and prevent drug shortages, and that agency maintains a list of drugs that are in short supply, including the market reason for the shortage and the estimated time required to resolve the shortage. When there is no supply problem, sometimes the answer is that the drug was recently acquired by a company, and the new owner has independently increased the price. Other times, the price varies from retailer to retailer, or is due to a coverage change by the pharmacy benefit manager. In these situations, the drug may be available at a better price at another retailer or from another health plan.

For our part, we remain watchful for information that suggests the possibility that unlawful anticompetitive activity is the reason for a price increase. Although the FTC has no authority to regulate the price of any product, including prescription drugs, protecting American consumers from anticompetitive activity in the health care sector has long been one of our most important responsibilities. Congress has empowered the FTC to prevent unfair methods of competition, such as illegal anticompetitive agreements among competitors to increase prices or restrict supply, and illegal exclusionary or predatory practices.

For example, several years ago, the FTC and 32 state Attorneys General sued a drug manufacturer and the only suppliers of a key ingredient for signing illegal agreements that increased wholesale prices of two widely-prescribed anti-anxiety drugs by 2000-3000 percent. The FTC alleged that the drug maker, Mylan Laboratories, Inc., and three suppliers of a key ingredient entered into exclusive supply contracts to deny Mylan’s competitors access to ingredients necessary to manufacture the drugs. In exchange for their participation in the scheme, Mylan agreed to share its profits with the suppliers, and then raised the price of the drugs exponentially — in the case of one product, from $7.30 for a 500-count bottle to $190. The FTC’s antitrust suit led to one of the largest monetary settlements in FTC history, with $100 million returned to overcharged consumers and state agencies. The companies also agreed not to engage in similar unlawful conduct in the future.

Congress also has empowered the FTC to prevent mergers that may substantially lessen competition or tend to create a monopoly. In reviewing proposed mergers between pharmaceutical companies, the FTC looks to see if the two companies have competing products and whether the elimination of one independent competitor may lead to higher prices for an essential therapy or course of treatment. Since last year alone, the FTC has required divestitures in ten merger cases involving dozens of pharmaceutical products, including over-the-counter motion sickness medications, nicotine patches, generic eye drops, Retin-A for the treatment of acne, and generic multivitamin fluoride drops for children in the United States who do not have access to fluoridated water, as well as drugs that treat hypertension and bacterial infections. These divestitures preserve competition, ensuring that consumers do not pay higher drug prices as a result of the merger.

Protecting consumers from anticompetitive activity in the pharmaceutical industry remains a top priority at the FTC. Inquiries from the public, including emails, phone calls, and letters describing marked price increases for pharmaceuticals or other products or services, provide information that we may use to develop or support antitrust enforcement efforts. Contact the Bureau of Competition if you have concerns about pricing or other activity that may raise antitrust issues. To help you shape your complaint, take a look at our Guide to the Antitrust Laws and other materials that describe FTC efforts to maintain competition in health care markets.

Having trouble paying for your medications? Sometimes consumers can significantly reduce medication costs simply by comparing prices at different retail pharmacies, talking to their physicians about the suitability of prescribing a lower-cost alternative, filing an appeal with their health plan if appropriate, or switching to another health plan. Check out the FTC’s consumer information about assistance programs for qualifying patients who do not have prescription drug coverage, and potential cost savings from using a generic version of a brand name drug.