Antitrust Policy, Patents, Pharmaceutical Drugs Flashcards
What are the antitrust laws in the US?
Sherman Act and Clayton Act
What is Sherman Act section 1?
covers conspiracies; contracts, combinations that are anticompetitive; agreements among firms to restrict competition; must include 2 firms making decisions together
What is the Sherman Act Section 2?
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
What is the Clayton Act?
prohibits certain business practices such as price discrimination, exclusionary practices, and mergers
Who are the enforcers of antitrust laws?
Antitrust Division of DOJ and FTC
What are antitrust issues in health care settings?
monopolies, monopsonies, collusion, mergers, etc
Patent
a patent is a device intended to explicitly give an inventor a property right over its discovery
What are the requirements to qualify for patents
patentable subject matter, novelty, utility, non obvious
What is the purpose of a patent?
encourage/stimulate research, development, and innovation
What are the benefits of being a patent holder?
the right to exclude all others from making, using, or selling for 20 years from the date their application was filed
What is the FDA approval process?
Phase I, Phase II, Phase III, FDA reviews application and grants approval if warranted
Phase I of patent approval
small human trial to establish drug safety
Phase II of patent approval
larger human trial; evaluate safety and effectiveness over longer time period
Phase III of patent approval
even larger human trial
Are prescription drugs the highest expenditure in US healthcare?
No, they just receive much of the media attention
What is the spending on prescription drugs?
~$370B
Why does the US spend more on prescription drugs than other OECD countries?
lack of health systems/regulatory systems, patent policy, inelastic demand, availability of substitutes, role of insurance (asymmetric info), new developments
What is the Executive Order (prescription drugs)?
imports drugs from other countries; limits on insulin costs; Medicare pays no more than Most Favored Nations pricing
Is the Executive Order still in place?
most of it is not because they were either blocked by courts or struck down
What is Direct Price Regulation (prescription drugs)?
creates an independent federal agency (bureau of prescription drug affordability and access) to enforce drug pricing
How would the Direct Price Regulation limit drug costs?
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
What is the noninterference clause?
Prohibits Medicare from negotiating on behalf of its beneficiaries for things like prescription drug pricing
What is the Inflation Reduction Act?
Medicare negotiating directly with the pharmaceutical drug manufacturers for the price of certain high spending brand name drugs that do not have good alternatives
What is the punishment for pharmaceutical companies who do not comply with the Inflation Reduction Act?
they must pay a tax/fine of some amount (or could theoretically pull drug from Medicare market but would lose a large market)
How have pharmaceutical companies reacted to the Inflation Reduction Act?
they have filed suit and do not want to participate, however courts have been siding with Medicare
What is product hopping?
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
How do pharmaceutical companies revise their drugs in order to receive new patents?
changing dosage, way to take the drug, how frequently it is taken, etc
Why are companies able to product hop?
an initial patent covers an active ingredient that is delivered in a specific form and dose with a specific absorption rate
When is product hopping procompetitive?
if the new product improves health rather than being developed for the sole purpose of maintaining exclusivity
When is product hopping procompetitive?
if it does benefit health of the consumer
What is an example of product hopping?
Namenda changed the formula enough to obtain a new patent and discontinued the original drug before its patent expired
Why did Oxycontin reformulate?
People were misusing the drug by crushing it, so they reformulated to an anti abuse drug
What is a no poaching agreement?
some agreement not to actively recruit/higher/incentivize someone else’s employee to leave that company and join yours
Which antitrust policy covers no poaching agreements?
Sherman Act Section 1
Who benefits and who is hurt from no poaching agreements?
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
What is Seamen v. Duke?
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
Per se violation
all a plaintiff has to prove is that there was an agreement, not that there was an anticompetitive impact
Market division/allocation
when firms stay in their geographic area and do not serve people who are in other areas due to an agreement between firms
What are antitrust damages and how are they determined?
Difference between how much you paid and how much the price would have been if there was no price fixing
Did people who were affected from no poaching suffer an overcharge or an undercharge?
An undercharge (their wages were too low)
Horizontal mergers
consolidation between providers that offer the same or similar services
Vertical mergers
consolidation between providers that offer different services along the supply chain
What is concentration?
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
