Elizabeth Warren, a Democrat, represents Massachusetts in the U.S. Senate.
Forty-seven states and the Justice Department are investigating a price-fixing conspiracy that’s driving up the cost of generic drugs in the United States. One investigator called it “most likely the largest cartel in the history of the United States.” This crisis calls for action. That is why I’m introducing legislation to authorize the public manufacture of generic drugs wherever drug companies have warped markets to drive up prices.
Drug companies use the “free market” as a shield against any effort to reduce prices for families. But they’re not operating in a free market; they’re operating in a market that’s rigged to line their pockets and limit competition. The entire pharmaceutical industry in reality runs on government-granted monopolies, mostly in the form of long-term patent protections.
This system, intended to compensate drug companies for innovation costs, should be closely scrutinized. One of its few remaining virtues is supposed to be that when these exclusive monopolies run out, market competition kicks in to produce cheap, generic versions for consumers. Sounds great — but it isn't working.
Antibiotics, steroids, heart medications, thyroid pills — nearly 90 percent of American prescriptions are written for generics. But the generic drug market is fundamentally broken.
Today, 40 percent of generic drugs are made by a single company, and the majority are manufactured by only one or two companies. With so little competition for generics, drug makers can push up prices and squeeze consumers without consequence. As a result, prescription drug prices are crushing families. Millions of Americans are skipping required doses and putting their health at risk because they can’t afford to renew their prescriptions.
Promoting competition used to be a central goal of economic policymaking. Today, in market after market, competition is dying as a handful of giant companies gain more and more market share. And as these companies get bigger, they create a vicious cycle, spending millions more on politics and lobbying to rig the rules, crushing potential competitors and further insulating themselves from legal or market accountability.
It doesn’t have to be this way. Aggressive enforcement of laws protecting competition is just the beginning. In the prescription drug market, the next step should be public manufacturing.
The Affordable Drug Manufacturing Act would allow the Department of Health and Human Services to step in where the market has failed. HHS would manufacture or contract for the manufacture of generic drugs in cases in which no company is manufacturing a drug, when only one or two companies manufacture a drug and its price has spiked, when the drug is in shortage, or when a medicine listed as essential by the World Health Organization faces limited competition and high prices.
Public manufacturing will be used to fix markets, not replace them. The Affordable Drug Manufacturing Act would allow the government to manufacture generic drugs at lower costs or contract with manufacturers to produce the drugs at competitive prices. And if a potential manufacturer thinks it can do better, the bill provides that the license to manufacture the drug is continually offered for sale, with the only condition being that the buyer would agree to keep selling the product to consumers at competitive prices.
Sound radical? It isn’t. The federal government already contracts with private manufacturers to produce stockpiles of drugs critical to protecting and treating Americans in the event of a biological, chemical or nuclear attack. My proposal would use similar tools to address the public health crisis resulting from unaffordable medicines.
There’s more to do to bring down high drug prices. Medicare should aggressively negotiate with drug companies. We should crack down on rampant abuse of the patent and regulatory system. We should import drugs from countries that sell the same medicines, with the same safety standards, but that charge their citizens a fraction of our costs. And I’ve already introduced legislation to make sure that no family will ever pay out of pocket more than a modest amount per month to fill its prescriptions. But in the battle for sustainable, affordable medicines, public manufacturing of generic drugs can be a critical tool.
The giant drug companies fighting to protect and expand their monopoly handouts will hate this idea. But Congress doesn’t work for them. And so long as these companies continue to game the system, we should insist on competitive markets that actually work for consumers.