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


  • F. M. Scherer


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

Suggested Citation

  • F. M. Scherer, 1997. "How US Antitrust Can Go Astray: The Brand Name Prescription Drug Litigation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(3), pages 239-256.
  • Handle: RePEc:taf:ijecbs:v:4:y:1997:i:3:p:239-256 DOI: 10.1080/758523205

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    Cited by:

    1. 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.
    2. Schinkel Maarten Pieter & Rüggeberg Jakob & Tuinstra Jan, 2003. "Illinois Walls," Research Memorandum 027, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    3. 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.
    4. 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.
    5. 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.
    6. Danzon, Patricia M & Chao, Li-Wei, 2000. "Does Regulation Drive out Competition in Pharmaceutical Markets?," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 311-357, October.
    7. Patricia M. Danzon & Eric L. Keuffel, 2014. "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.

    More about this item


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

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics


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