Biosimilars & Exclusive Dealing Antitrust Law: The Case of Pfizer Inc v Johnson & Johnson et al.
15 Pages Posted: 8 Nov 2017 Last revised: 20 Feb 2018
Date Written: October 30, 2017
Following the generally accepted theories of the legal scholar Robert Bork and his Chicago School colleagues, vertical restraints such as exclusive dealing contracts are presumptively procompetitive and welfare-enhancing because it would be irrational for a buyer to exclude the lowest cost supplier.
On September 20, 2017, the drug manufacturer Pfizer filed a lawsuit Pfizer Inc, v Johnson & Johnson et al (link to the full court filing) claiming that Johnson & Johnson (J&J) violated Section 2 of the Sherman Antitrust Act by monopolizing the market for its incumbent biologic drug Remicade®.
This was achieved via rebate contracts with the largest insurance companies in the USA that had the effect of excluding from coverage Pfizer’s biosimilar drug Inflectra®.
We will present the case that Pfizer’s antitrust case is weak because it was unlikely that Pfizer was the low cost supplier based on a view of lump sum rebate offers as efficiency-enhancing “signals” of expected consumer demand for a product.
What insurance companies are doing is similar to the AdWord algorithm Google came up with for “slotting” search ads based on a calculated “AdRank”, which is a function of both unit bids and expected demand as measured by estimated click-through rates.
Keywords: Antitrust Law, Vertical Restraints, Exclusive Dealing, Biosimilars, Chicago School, Google AdWords, Lump Sum Rebates, Robert Bork, Pharma
JEL Classification: K21, K42, L40
Suggested Citation: Suggested Citation