Antitrust Policy, Patents, Pharmaceutical Drugs

Question 1

What are the antitrust laws in the US?

Answer 1

Sherman Act and Clayton Act

Question 2

What is Sherman Act section 1?

Answer 2

covers conspiracies; contracts, combinations that are anticompetitive; agreements among firms to restrict competition; must include 2 firms making decisions together

Question 3

What is the Sherman Act Section 2?

Answer 3

covers monopolization or intent to monopolize; being of a monopoly does not alone offend the antitrust laws; punishes illegally obtained monopolies, not aggressive competition or more efficient competitors

Question 4

What is the Clayton Act?

Answer 4

prohibits certain business practices such as price discrimination, exclusionary practices, and mergers

Question 5

Who are the enforcers of antitrust laws?

Answer 5

Antitrust Division of DOJ and FTC

Question 6

What are antitrust issues in health care settings?

Answer 6

monopolies, monopsonies, collusion, mergers, etc

Question 7

Patent

Answer 7

a patent is a device intended to explicitly give an inventor a property right over its discovery

Question 8

What are the requirements to qualify for patents

Answer 8

patentable subject matter, novelty, utility, non obvious

Question 9

What is the purpose of a patent?

Answer 9

encourage/stimulate research, development, and innovation

Question 10

What are the benefits of being a patent holder?

Answer 10

the right to exclude all others from making, using, or selling for 20 years from the date their application was filed

Question 11

What is the FDA approval process?

Answer 11

Phase I, Phase II, Phase III, FDA reviews application and grants approval if warranted

Question 12

Phase I of patent approval

Answer 12

small human trial to establish drug safety

Question 13

Phase II of patent approval

Answer 13

larger human trial; evaluate safety and effectiveness over longer time period

Question 14

Phase III of patent approval

Answer 14

even larger human trial

Question 15

Are prescription drugs the highest expenditure in US healthcare?

Answer 15

No, they just receive much of the media attention

Question 16

What is the spending on prescription drugs?

Answer 16

~$370B

Question 17

Why does the US spend more on prescription drugs than other OECD countries?

Answer 17

lack of health systems/regulatory systems, patent policy, inelastic demand, availability of substitutes, role of insurance (asymmetric info), new developments

Question 18

What is the Executive Order (prescription drugs)?

Answer 18

imports drugs from other countries; limits on insulin costs; Medicare pays no more than Most Favored Nations pricing

Question 19

Is the Executive Order still in place?

Answer 19

most of it is not because they were either blocked by courts or struck down

Question 20

What is Direct Price Regulation (prescription drugs)?

Answer 20

creates an independent federal agency (bureau of prescription drug affordability and access) to enforce drug pricing

Question 21

How would the Direct Price Regulation limit drug costs?

Answer 21

the agency determines appropriate drug price and enforced those prices (weighs costs of R&D and costs of comparable therapies and consider federal money that contributed); allows govt to negotiate for better drug prices

Question 22

What is the noninterference clause?

Answer 22

Prohibits Medicare from negotiating on behalf of its beneficiaries for things like prescription drug pricing

Question 23

What is the Inflation Reduction Act?

Answer 23

Medicare negotiating directly with the pharmaceutical drug manufacturers for the price of certain high spending brand name drugs that do not have good alternatives

Question 24

What is the punishment for pharmaceutical companies who do not comply with the Inflation Reduction Act?

Answer 24

they must pay a tax/fine of some amount (or could theoretically pull drug from Medicare market but would lose a large market)

Question 25

How have pharmaceutical companies reacted to the Inflation Reduction Act?

Answer 25

they have filed suit and do not want to participate, however courts have been siding with Medicare

Question 26

What is product hopping?

Answer 26

a firm that has a patent on an existing drug can innovate further into a new idea that related to the original idea in order to receive a new patent and therefore more time with exclusivity

Question 27

How do pharmaceutical companies revise their drugs in order to receive new patents?

Answer 27

changing dosage, way to take the drug, how frequently it is taken, etc

Question 28

Why are companies able to product hop?

Answer 28

an initial patent covers an active ingredient that is delivered in a specific form and dose with a specific absorption rate

Question 29

When is product hopping procompetitive?

Answer 29

if the new product improves health rather than being developed for the sole purpose of maintaining exclusivity

Question 30

When is product hopping procompetitive?

Answer 30

if it does benefit health of the consumer

Question 31

What is an example of product hopping?

Answer 31

Namenda changed the formula enough to obtain a new patent and discontinued the original drug before its patent expired

Question 32

Why did Oxycontin reformulate?

Answer 32

People were misusing the drug by crushing it, so they reformulated to an anti abuse drug

Question 33

What is a no poaching agreement?

Answer 33

some agreement not to actively recruit/higher/incentivize someone else's employee to leave that company and join yours

Question 34

Which antitrust policy covers no poaching agreements?

Answer 34

Sherman Act Section 1

Question 35

Who benefits and who is hurt from no poaching agreements?

Answer 35

employers benefit since they do not have to offer higher salaries/benefits; employees and hurt because they are trapped in their current job and cannot negotiate salary increases

Question 36

What is Seamen v. Duke?

Answer 36

Danielle Seaman was employed by Duke and applied for a lateral position at UNC, did not hire her because of no poaching agreement, there was proven collusion

Question 37

Per se violation

Answer 37

all a plaintiff has to prove is that there was an agreement, not that there was an anticompetitive impact

Question 38

Market division/allocation

Answer 38

when firms stay in their geographic area and do not serve people who are in other areas due to an agreement between firms

Question 39

What are antitrust damages and how are they determined?

Answer 39

Difference between how much you paid and how much the price would have been if there was no price fixing

Question 40

Did people who were affected from no poaching suffer an overcharge or an undercharge?

Answer 40

An undercharge (their wages were too low)

Question 41

Horizontal mergers

Answer 41

consolidation between providers that offer the same or similar services

Question 42

Vertical mergers

Answer 42

consolidation between providers that offer different services along the supply chain

Question 43

What is concentration?

Answer 43

takes into account the relative size and the number of firms in the marker; 0 HHI is perfectly competitive market and 10,000 HHI is one firm in the market