Previous business/academic article Next business/academic article
Academic Articles Awards > Unilateral Conduct

Unfair Drug Prices and Section 5

Harry First, CPI Antitrust Chronicle, November 2015

See Harry First's resume

Vote for this articleHelp

* Average
** Interesting
*** Good
**** Excellent
***** Must receive an Award!

Please note that the star(s) appearing on the article page before you have voted reflect the status of all votes registered to date.

Readers’ vote will close on February 15, 2016. Readers’ vote will allow you to nominate 1 article for each of the Awards, i.e., 10 Academic articles, 10 Business articles, and the best Soft Laws. The readers’ short-list of Academic and Business Articles will be communicated to the Board together with the 20 articles nominated by the Steering Committees. The Board will decide on the award-winning articles. Results will be announced at the Awards ceremony to take place in Washington DC on the eve of the ABA Antitrust Spring Meeting on April 5, 2016.

Recent examples of pharmaceutical drug acquisitions followed by exorbitant price raises have drawn cries of indignation, from presidential candidates and from Congress, but the question this essay addresses is whether this type of conduct should bring antitrust action, specifically, action by the Federal Trade Commission under Section 5 of the Federal Trade Commission Act. I think the answer should be yes. Drawing on prior Section 5 proceedings involving patent holders that breach FRAND commitments and charge licensees unfair high prices, as well as an FTC case involving pharmaceutical drug acquisitions, I argue that drug acquisitions followed by excessive prices are good candidates for a standalone Section 5 proceeding. These acquisitions may fall short under traditional Clayton Act and Sherman Act analysis, but they are appropriate for Section 5 because the resulting extortionate price raising goes to the heart of traditional antitrust concern — rent extraction, welfare loss, and redistribution of consumer surplus. I also argue that such a proceeding would be consistent with a liberal interpretation of the Commission’s recently issued Statement of Enforcement Principles for Section 5.

Download our brochure