Pharma pricing is a problem, but antitrust isn’t the (only) solution

By Christine S. Wilson & David A. Hyman (The Hill)

The urgent task of developing a COVID-19 vaccine has reignited a perennial Washington debate: how to ensure access to affordable medicines without compromising incentives for innovation. Most agree we should handsomely reward a vaccine’s inventor — but a high-priced vaccine will be useless for those who cannot afford it.

As we address the ills of soaring drug prices, one prescription should be ignored. Rather than focusing on the drivers of escalating prices, some policymakers argue for abandoning settled principles of antitrust law in a misguided attempt to “fix” something — effective, evidence-based antitrust enforcement — that is not broken.

Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.), for example, propose a ban on all mergers large enough to require pre-notification to the antitrust agencies. Warren claims that “giant corporations and private equity vultures are just waiting for a chance to gobble up struggling small businesses.” Even if that were true — notifications have actually declined — a merger moratorium is like choosing old-fashioned chemotherapy and its life-threatening side effects over more targeted therapy. The moratorium will kill a few problematic mergers that might threaten the body economic, but it will also kill many good mergers, needlessly stifling economic activity.

A narrower approach entails banning nearly all pharmaceutical mergers, as advocated by the Open Markets Institute. Two FTC commissioners seem amenable. Two months ago, they voted to reject AbbVie’s acquisition of Allergan, and one proposed to unleash the Inspector General on FTC staff for daring to recommend to the Commission that pharma mergers be permitted to proceed. A few months earlier, the same two commissioners voted to reject Bristol-Myers Squibb’s acquisition of Celgene, even though they acknowledged the proposed settlement, involving the biggest divestiture in merger review history, resolved every antitrust problem the FTC identified.

As current and former FTC officials, we believe these proposals represent a flawed approach. The notion that the FTC should prevent mergers absent evidence of an antitrust violation is deeply misguided – and jeopardizes the FTC’s impressive winning streak based on the many cases it has brought. During the past five years, the Commission has challenged 14 pharmaceutical mergers and required companies to divest 131 drugs. Beyond mergers, in 2013 the FTC won a landmark victory at the Supreme Court in FTC V. Actavis, essentially eliminating anticompetitive patent litigation settlements. And in January, the FTC sued Vyera Pharmaceuticals and “pharma bro” Martin Shkreli. These efforts result in massive savings for consumers and taxpayers; just ending reverse payments in patent litigation settlements saves $3.5 billion each year.

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