A Canary in the Coal Mine for the Failure of U.S. Competition Law: Competition Problems in Prescription Drug Market

By: Michael Kades (Washington Center for Equitable Growth)

All too often in the press or on social media, competition and monopoly are synonymous with digital platforms. Without doubt, those markets raise important competition issues and deserve the attention that they are receiving. Market power and its abuse, however, extends across the U.S. economy.¹ This subcommittee should be commended for its investigation into market problems throughout the economy. The substantial antitrust reform proposals offered by both Chairwoman Klobuchar and Ranking Member Lee, respectively, reflect a judgment that the antitrust laws, as currently interpreted and enforced, are failing to protect competition.

The subcommittee is correct to examine competition in prescription drug markets. Prescription drugs cost nearly $370 billion a year, forcing too many Americans to choose between their health and other necessities. Further, the impact is often borne by those least able to bear it: lower-income Americans and those from historically disadvantaged groups.

It is an important industry, and one that is rife with anticompetitive conduct. Although not the sole cause of high prescription drug costs, abusive practices that distort competition contribute to the problem. Too many companies exclude competition through a variety of anticompetitive tactics, including rebate traps, product hopping, sham litigation, citizen petition abuse, and pay-for-delay patent settlements.

Anticompetitive activity is prevalent for two related reasons. First, the economic dynamics of prescription drug markets make anticompetitive conduct both uniquely effective and profitable. Second, the courts have increasingly stripped the antitrust laws of their potency. As a result, too often, anticompetitive conduct escapes condemnation. Rather than deterring anticompetitive conduct, the antitrust laws, as currently interpreted by the courts, almost invite it…

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