Big Pharma

Drug development is a complicated, expensive, resource-intensive process. Though pharmaceutical companies invest about a billion dollars for a single new drug (Wikipedia), the pay-off is worth it. Drugs like Lipitor (atorvastatin) and Plavix (clopidogrel) have made many billions of dollars in global sales (12.9 billion for Lipitor). However, the patent on these drugs start ticking once they are discovered, and after patents expire, cheaper (equally effective) generic drugs are allowed.

To delay the flood of generic drugs lowering the market price of the moneymakers, big pharma has entered into agreements in which they pay generic drug makers to drop challenges to patents. By offering generic drug companies perhaps a hundred million dollars, they can keep generic versions of their blockbusters off the market, effectively extending their patent by several years. In the end, the cost is transferred to the consumers. The FTC has tried to block such agreements, but last year, it was ruled that the FTC was beyond its jurisdiction.

While I cannot say legally what ought to be the case, I think this is a very interesting question and brings up one side of pharmaceutical companies that I had not considered before.