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Issue Analysis

    Issue Analysis 86 - Suppressing Generic Drugs Fleeces Consumers

    02/25/1999

    Brand name pharmaceutical companies and federal and state governments are raiding consumers’ pocketbooks by preventing them from buying generic drugs. Such restrictions can be an enormous financial drain, especially for low-income Americans and seniors who live on fixed incomes and pay for prescriptions out-of-pocket.

    Generic drugs offer consumers more choices and keep prices down by competing with brand name pharmaceuticals, often at savings of 30 percent to 60 percent. When government restricts access to generics, it forces consumers either to buy brand name drugs, which can cost one and a half to three times more, or to do without treatment altogether. This restriction also means higher costs for employers and unions (who provide health benefits); taxpayers (who fund government health programs); and individual consumers (especially seniors). According to Common Cause, a watchdog group that examines the influence of special interests on politics, government suppression of generics is costing Americans $550 million a year, hidden in higher prices for prescriptions.

    In effect, government restrictions on generics are hidden taxes that directly benefit brand name pharmaceutical companies. These companies lobby for restrictions on generics to offset the high costs imposed on brand names by the federal Food and Drug Administration (FDA). These companies also seek monopoly rents through lobbying for patent extension. Patents were intended to reward and encourage innovation. Extending patents that have already been granted do not create any additional incentives to innovate.

     

    Full Study
    Issue Analysis 86 - Suppressing Generic Drugs Fleeces Consumers
    (PDF Format - 144kb)