How Big Pharma Keeps Drug Prices High

Prescription drug costs continue to place growing pressure on patients, employers, union health plans, and public programs across the country.

For many working families, higher drug costs can mean higher premiums, increased out-of-pocket expenses, pressure on wages and benefits, and more difficult choices about care and coverage.

Employers and union health plans are facing the same challenge. As prescription drug spending continues to rise, plans are under increasing pressure to maintain affordable coverage while managing long-term costs.

That debate often focuses on how prescription drug benefits are managed within the health care system. But an equally important question is: why do some drugs remain so expensive even after their original patents were expected to expire?

In many cases, the answer lies in the strategies pharmaceutical manufacturers use to delay competition and extend market exclusivity, resulting in years more of high prices, delayed competition, and increased costs throughout the health care system.

The “Monopoly Extension” Playbook

Many large pharmaceutical manufacturers use a range of tactics designed to delay generic competition and protect market share for high-revenue drugs. These strategies keep lower-cost alternatives off the market for years.

Patent Thickets

One common tactic is the use of “patent thickets.”

Instead of relying on a single patent, manufacturers file dozens of overlapping patents covering a drug, its manufacturing process, delivery system, or formulation, creating a complex legal barrier for generic or biosimilar competitors.

For manufacturers, every additional year without competition can mean billions in continued revenue. For plans and patients, it means paying sky rocketing prices.

Why Generics Matter

Generic drugs are one of the most important tools for keeping prescription drug costs affordable in the United States.

While brand-name and specialty drugs account for the largest share of overall spending, generic medications make up the overwhelming majority of prescriptions filled each year and typically at a fraction of the cost.

That competition matters in driving down prices.

When generic alternatives enter the market:

prices often decline significantly
PBMs gain leverage to negotiate lower costs
employers and union health plans can better manage premiums and benefit costs
patients gain access to more affordable treatment options

This is why competition is so critical to the long-term affordability of prescription drug coverage.

PBMs play an important role in that process by:

negotiating with manufacturers
encouraging competition among therapeutically equivalent drugs
promoting lower-cost generic utilization through formularies and benefit design

When generic competition is delayed—whether through patent litigation, reformulations, or other exclusivity strategies—those savings are delayed as well, and PBMs have fewer tools available to drive costs down.

For employers, union plans, and public programs, the impact can be substantial. Higher brand-name spending ultimately flows through the entire system in the form of increased premiums, higher contributions, and greater financial pressure on health care benefits.

Policies that preserve and promote robust competition remain one of the most effective ways to improve affordability across the prescription drug market.

Why This Matters for Employers and Union Plans

These strategies do not just affect individual patients at the pharmacy counter.

They increase costs throughout the health care system.

When lower-cost generics or biosimilars are delayed:
• employers and union plans pay more
• premiums and contributions rise
• plan flexibility becomes more limited
• taxpayers face higher costs in Medicare and Medicaid

These costs originate upstream by drug manufacturers.

Competition Is What Lowers Prices

The most effective long-term mechanism for reducing prescription drug costs is meaningful market competition.

When generic and biosimilar alternatives enter the market:
• prices typically fall
• PBMs and health plans gain greater negotiating leverage
• patients, employers, and union plans benefit from lower costs

That is why policies focused on accelerating competition and addressing anti-competitive manufacturer practices have become an increasing focus of policymakers at both the state and federal levels.

The Bigger Picture

As Massachusetts continues to debate prescription drug policy, it is important to distinguish between:

• how costs are managed within the system
• and what is driving those costs in the first place

PBMs, employers, and union health plans operate within a marketplace shaped by manufacturer pricing and market exclusivity.

Their role is to negotiate discounts, encourage competition, and manage benefits in a way that helps protect affordability for plans and patients.

But when competition is delayed, costs remain high for everyone else in the system, and there are fewer opportunities to leverage lower-cost alternatives.

Addressing affordability ultimately requires looking not only at benefit design and reimbursement structures, but also at the strategies that can keep competition off the market long after a patent was originally intended to expire.