Unfair Drug Prices and Section 5

CPI Antitrust Chronicle, November 2015 (2)

NYU Law and Economics Research Paper No. 16-03

10 Pages Posted: 7 Dec 2015 Last revised: 21 Jan 2016

See all articles by Harry First

Harry First

New York University School of Law

Date Written: December 2, 2015

Abstract

Recent examples of pharmaceutical drug acquisitions followed by exorbitant price raises have drawn cries of indignation, from presidential candidates and from Congress, but the question this essay addresses is whether this type of conduct should bring antitrust action, specifically, action by the Federal Trade Commission under Section 5 of the Federal Trade Commission Act. I think the answer should be yes. Drawing on prior Section 5 proceedings involving patent holders that breach FRAND commitments and charge licensees unfair high prices, as well as an FTC case involving pharmaceutical drug acquisitions, I argue that drug acquisitions followed by excessive prices are good candidates for a standalone Section 5 proceeding. These acquisitions may fall short under traditional Clayton Act and Sherman Act analysis, but they are appropriate for Section 5 because the resulting extortionate price raising goes to the heart of traditional antitrust concern — rent extraction, welfare loss, and redistribution of consumer surplus. I also argue that such a proceeding would be consistent with a liberal interpretation of the Commission’s recently issued Statement of Enforcement Principles for Section 5.

Suggested Citation

First, Harry, Unfair Drug Prices and Section 5 (December 2, 2015). CPI Antitrust Chronicle, November 2015 (2); NYU Law and Economics Research Paper No. 16-03. Available at SSRN: https://ssrn.com/abstract=2699843

Harry First (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6211 (Phone)
212-995-4760 (Fax)

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