The Camel’s Nose…


by Karl Denninger, Market Ticker:

No, really, you mean the law really does apply?

Executives at more than a dozen generic-drug companies had a form of shorthand to describe how they conducted business, insider lingo worked out over steak dinners, cocktail receptions and rounds of golf.

The “sandbox,” according to investigators, was the market for generic prescription drugs, where everyone was expected to play nice.

“Fair share” described dividing up the sales pie to ensure that each company reaped continued profits. “Trashing the market” was used when a competitor ignored these unwritten rules and sold drugs for less than agreed-upon prices.

15 USC Chapter 1.

Which has been completely ignored by the Federal Government and its prosecutors now, when it comes to the medical industry generally, for 30+ years.

This, despite the fact that the industry twice, in concert with the insurance business, tried to claim exemptions.  Both of those cases went all the way to the Supreme Court and the medical and insurance industries lost both cases.

So the law does apply, and has been tested.

Doesn’t matter.  The drug makers don’t care.  They have broken the law with impunity.  And why not?  Nobody goes to prison.

If you think this is just about generic drugs, you’re dead flat wrong.  It applies to everything in the medical industry.  The very premise of being unable to get a price as a customer while the very same hospital has negotiated a price with an insurance firm is in essence the definition of anti-trust.  Predatory, collusive behavior intended to prevent you from shopping — that is, exercising competition.  15 USC Chapter 1 says that sort of behavior is a criminal felony.  Well?

Screwing people who can’t negotiate violates all manner of anti-gouging laws that exist on the books in most states as well.  Those laws may have as their predicate natural disasters but few of them actually require that; most require only duress, which is why the motel has to post a sign on the back of the door with the “rack rate” and they can’t bill you 10x that, or refuse to give you a price, before you sleep on the bed.  Never mind the implied covenant of fair dealing that is in all contracts and cannot be waived.

None of this stuff is hard to fix.  Enforce existing law and it all gets fixed.  Is it really that difficult?


So why are the states going after this?  Likely because Medicaid comes with an unfunded mandate they have to cover, and it’s hurting them.  Finally.

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