White Paper: The Role of Monopoly in America’s Prescription Drug Crisis

Bipartisan reform efforts to combat high drug prices often fail to recognize how pharmaceutical corporations suppress fair market competition through various forms of monopoly. In a newly published white paper by the Open Markets Institute, The Role of Monopoly in America’s Prescription Drug Crisis, we detail how increasing corporate concentration in the pharmaceutical industry, and the monopoly markets for individual drugs created by a deeply flawed and increasingly abused patent and regulatory system, are the root causes of the problem.

Drug manufacturers engage in a variety of anti-competitive practices, such as abusing the patent system, various FDA regulations, filing sham citizen petitions with the FDA, and tactics to eliminate competition. These practices are used to extend and protect monopolies and to stifle competition—and they wind up needlessly costing consumers millions of dollars each year.

These practices ultimately drive up drug prices, decrease innovation, and cause shortages and disruptions of the supply of many key drugs. They also imperil drug safety.

Brand drug manufacturers also stifle competition and gain monopoly profits by offering substantial rebates or discounts to large-scale buyers—but only if the purchasers refuse to buy a competing generic drug that might erode the brand drug’s market dominance.

Many of these problems can be solved or ameliorated through better competition policy, which can involve the application and enforcement of our antitrust laws. Other policy solutions include the forced licensing of patents, cash prizes for innovation, or price regulation, among other recommendations.

In each instance, we are looking for public policies that will reset the terms of competition and the balances of power in drug markets so that they serve the public good. Read our entire report here.