States, U.S. Collude to Hike Rx Prices

I'd bet that Avis, Hertz and other car-rental businesses pay a lot less per car than I do. After all, they buy entire fleets and I buy only one car every few years. Imagine if I could get a law passed that made it illegal for cars to be sold to different customers for different prices. Would I be able to buy cars cheaper?

Probably not: Depending on how many cars were sold to corporate fleets versus how many to individuals, the price of cars to corporate fleets would rise. Renters would pay a higher price.
So, governments generally allow different prices to prevail in markets - but not when the government competes against private customers. For example, it is illegal for a private patient or organization to pay less than the government for prescriptions. We've known for years of evidence that this increases prices to private buyers of medicines (which I discussed in a 2003 report, pp. 10-12, 25-26).

This has not stopped states and the federal government from acting aggressively to artificially increase Rx prices for American patients. The latest is a multi-state and federal lawsuit against Wyeth Pharmaceuticals, in which 16 states and the U.S. are colluding on a lawsuit charging that private hospitals got lower prices for Protonix Oral and Protonix IV acid-reflux medicines than state Medicaid programs were able to negotiate.

The business case for these discounts was that the patients would be loyal to those medicines once discharged from the hospitals, and encourage their doctors to keep them on those meds as out-patients.

Horror of horrors! Competition between Wyeth and other drug-makers who make different therapies for acid-reflux disorder (such as a certain purple pill). And the states were little more than ineffective bystanders. Well, we just can't have that.

The result of this lawsuit will not be lower Rx prices to state Medicaid programs: Rather, it will be higher drug prices for hospitals and out-patients, and a higher likelood of fewer patients having access to a broad choice of anti-reflux therapies.