Games Drugmakers Play

(This column has been corrected.) One of my goals when I joined Bloomberg View a month ago was to dive into the contentious subject of drug pricing. I’d like to explain to readers why the pharmaceutical companies have been raising prices so relentlessly these past half-dozen years, even as the practice has become a huge issue on Capitol Hill and in the country. My friend Barry Werth, who has written two fine books about the biotech company Vertex, says the answer is simple: “Because they can.” But the details of how they do it can be murky, complicated — and sometimes underhanded.

Take, for instance, the generic-drug maker Mylan. The purpose of generic-drug companies, of course, is to come up with inexpensive versions of branded drugs that they can sell once the patent expires on the name-brand product. Indeed, the famous Hatch-Waxman Act of 1984, which is the foundational document of the modern generics industry, specifically gave companies incentives to get cheaper drugs on the market quickly. For example, companies that successfully challenged drug patents in court could get a six-month head start before any other company could sell its own generic version.