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How US Antitrust Can Go Astray: The Brand Name Prescription Drug Litigation

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  • F. M. Scherer
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    Abstract

    This paper analyzes the substantive issues in a US antitrust case under which retail pharmacists alleged that drug manufacturers conspired to avoid granting the retailers discounts that were offered to health maintenance organizations (HMOs). The HMOs are viewed as an innovative means of delivering health care to consumers at lower cost. They elicited discounts by credibly threatening to exclude manufacturers' drugs unless price concessions were offered — a strategy drug retailers were unable or unwilling to pursue. In challenging those discounts, the retail pharmacists pursued their traditional strategy of using governmental power to oppose innovations that squeezed their price/cost margins and reduced drug prices to consumers. The evidence of manufacturer conspiracy appears to have been ephemeral at best, and the litigation appears more likely to have reduced competition and consumer welfare than enhancing it

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

    Volume (Year): 4 (1997)
    Issue (Month): 3 ()
    Pages: 239-256

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    Handle: RePEc:taf:ijecbs:v:4:y:1997:i:3:p:239-256

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    Web page: http://www.tandfonline.com/CIJB20

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    Web: http://www.tandfonline.com/pricing/journal/CIJB20

    Related research

    Keywords: Pharmaceuticals industry; Retail pharmacies; Antitrust policy; Price discrimination; Health care; JEL classifications: K21; L41; L65; 111;

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    Cited by:
    1. Patricia M. Danzon & Eric L. Keuffel, 2013. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484 National Bureau of Economic Research, Inc.
    2. Joan Ramon Borrell Arque, 2001. "Drug price differentials caused by de-listing and price cap policies," Working Papers in Economics 70, Universitat de Barcelona. Espai de Recerca en Economia.
    3. Dixit, Ashutosh & Braunsberger, Karin & Zinkhan, George M. & Pan, Yue, 2005. "Information technology-enhanced pricing strategies: managerial and public policy implications," Journal of Business Research, Elsevier, vol. 58(9), pages 1169-1177, September.
    4. Maarten Pieter Schinkel & Jan Tuinstra & Jakob Rüggeberg, 2008. "Illinois Walls: how barring indirect purchaser suits facilitates collusion," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 683-698.
    5. Ebenezer Tetteh, 2009. "Implementing differential pricing for essential medicines via country-specific bilateral negotiated discounts," Applied Health Economics and Health Policy, Springer, vol. 7(2), pages 71-89, June.

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