04/09/2013 03:24 pm ET Updated Jun 09, 2013

Time to Stop Backroom Deals That Drive Up Drug Prices

When the Supreme Court justices met for their most recent session, the media's attention was focused squarely on two cases dealing with same-sex marriage. Largely lost in the coverage was another case that could have a major impact on the medicine we take, and how much we pay for it.

You've probably been hit by a hefty price tag when you fill a prescription at the pharmacy, even if you have insurance. A new Consumer Reports poll found that Americans spent $758 out of pocket for medication in 2012.

One way you can try to save at the pharmacy is choosing a generic version of the drug, instead of the brand-name medication. But some consumers may not have that option, especially when it comes to higher-priced prescriptions.

Why is that? One reason is that oftentimes, drug companies make deals with generic companies to keep the lower-priced competition out of the market. This issue could amount to billions of dollars in revenue for drug makers and, ultimately, costs to consumers.

The law that authorizes generic drugs -- known as Hatch-Waxman -- encourages drug makers to produce less costly alternatives to brand products by providing a six-month period for the first generic manufacturer to file an application for approval from the FDA to exclusively market its generic version of a drug.

Congress intended to encourage less costly generics to come to the market by providing this exclusivity period. But under pay-for-delay agreements, drug manufacturers pay the companies that file first to keep their product off the market and instead "park their exclusivity," effectively blocking other generics from coming out with their own products.

According to the Federal Trade Commission, there have been 165 of these "pay for delay" agreements between brand and generic companies since 2004 that cost taxpayers $3.5 billion a year.

Consumers Union, the policy and advocacy arm of Consumer Reports, believes that these deals hurt competition, consumers, and ultimately the spirit of the law. In the case now before the Supreme Court -- Federal Trade Commission v. Actavis -- we hope the high court will rule that these collusive and anticompetitive payments are no longer permissible.

If the court doesn't rule against these agreements, Congress could step up and take action to end pay-for-delay payments. There's a bipartisan bill called the Fair Generics Act, introduced by Sen. Al Franken, D-Minn., and Sen. David Vitter, R-La. Consumers Union thinks this is a good piece of legislation, because it would fix the flaw that allows first filers who don't bring a product to market to block other generic manufacturers' products.

The bottom line is you shouldn't be forced to pay a higher price for prescriptions because of backroom industry deals. We want to see more generics reach the shelves faster. While we wait for the Supreme Court to decide, you can learn how to spend less at the pharmacy and find the lowest-priced generic drug in Consumer Reports' "Same Generic Drug, Many Prices." And you can visit our Best Buy Drugs page for unbiased information on prescription drugs, plus advice from our medical experts.