Bloomberg Law Highlights AAI’s Roundtable on Pharmaceutical Competition

In an October 3, 2019 article “FTC Weighs New Tactics to Address ‘Unfair’ Drug Prices” Bloomberg Law referenced key discussion at AAI’s recent competition roundtable. From the article:

The Federal Trade Commission is thinking about how it could use its authority around unfair and deceptive practices to stop excessive drug price increases, a top official said.

The unfair and deceptive practices law says the commission can stop situations where there is substantial consumer injury without offsetting benefits and one that consumers can’t reasonably avoid.

A massive drug price increase might run afoul of that law, Bradley Albert, deputy assistant director of the health-care division at the FTC, said at an American Antitrust Institute event Oct. 2. The FTC has never brought a case under the provision, but Commissioners Rohit Chopra and Rebecca Kelly Slaughter wrote in June that they thought it could be used.

The idea is that the drug price increases are “so high that they are unfair,” Michael Carrier, an antitrust professor at Rutgers Law School, said in an interview.

Patients are “substantially injured” by the high prices, they can’t avoid those prices, and there are no “countervailing benefits,” Carrier said.

Chopra and Slaughter outlined how they could see a successful case being brought in this type of situation.

They said the price increase would need to involve a drug that had its patents expire, a lack of therapeutic alternatives, and barriers to new market entry. The price increase would need to not have a reasonable relationship to research and development costs or changes in supply and demand. And, they said, the harm would not be outweighed by other benefits to patients.

The commission could seek a remedy or compensation for patients to recoup money the companies obtained through the practice, or other relief, the commissioners said.

However, Carrier said it would be difficult to prove the prices are unfair.

Even getting a definition of the term would be arduous. Drug prices are generally higher than the marginal cost of production because companies need to recoup research and development spending, Carrier said. The problem is companies don’t release how much they spent on research, and therefore it would be difficult to determine how much is enough to make up that spending, Carrier said.

There is no “clear limiting principle that says where the line is to be drawn” between an unfair and a fair price, Carrier said.

And, the unfair and deceptive practices law only gives the authority to bring cases under it to the FTC, so it would depend on the commissioners to decide to bring a case, he said.