The New Drug Buyer: The Changing Definition of the Consumer for Antitrust Enforcement in the Pharmaceutical Industry

Monday, January 1st, 2001 at 12:00 am by W. E. "Ted" Afield
W. E. “Ted” Afield, The New Drug Buyer: The Changing Definition of the Consumer for Antitrust Enforcement in the Pharmaceutical Industry, 2001 Colum. Bus. L. Rev. 203

Several factors relating to the interactions of patients, physicians, and third party payers help make the health care industry, specifically the pharmaceutical industry, unique. As a result, antitrust enforcement in this industry raises an equally unusual set of problems. One of the most difficult issues in pharmaceutical antitrust enforcement is properly defining the consumer. In re-conceptualizing product markets to take into account new trends in the pharmaceutical industry, antitrust enforcers have been compelled, either directly or implicitly, to reconsider who the consumer is in order to evaluate properly what products are considered viable substitutes for each other in consumption decisions.

In antitrust issues involving prescription drugs, properly defining the consumer takes on critical importance in establishing the relevant product market. As Mark Whitener points out:

Remarkable changes are occurring in these [pharmaceutical] markets: the development of new drugs and other technologies; the expiration of some major pharmaceutical patents and the rapid growth of the generic drug industry; changes in the ways pharmaceuticals are distributed and paid for, including increasing coverage of pharmaceuticals in health care benefits plans and the related development of pharmacy benefits managers (PBMs); and, partly in response to some of these factors, a variety of mergers, joint ventures, and other business arrangements. The market for prescription drugs is unique because there are several parties involved in the consumption of the product. While the patient is the ultimate consumer and benefactor of the product, the patient cannot acquire the product without a physician’s approval. Furthermore, third party payers, such as the PBMs that Whitener mentioned, have become increasingly important in deciding between different drugs by choosing which drugs appear on formularies.The combination of physician, patient, and third-party payer demand that a modern definition of the pharmaceutical consumer be adopted to account for the complexities of the modern market. The solution, however, is not as simple as expanding the definition of the consumer to encompass all of these market players. This article will argue that antitrust enforcers will have to take a very fact-specific approach to consumer definition of prescription drugs which will often depend on the nature of the drug being considered. Whether to focus primarily on one of the possible consumer candidates or to treat all of them equally will depend on factors such as the drug’s purpose and how and to whom it is marketed.

Part Two will address the importance of defining the consumer in establishing the relevant product market in antitrust enforcement. Part Three will describe new trends in the pharmaceutical industry that require shifting the traditional definition. Part Four will briefly summarize the traditional view of health care professionals as being the primary consumers of prescription drugs. Part Five will illustrate how the modern definition of the consumer needs to be much more expansive than the traditional model. This section will also draw some analogies to other areas of the law that focus on consumer definition to illustrate the expanding definition. Finally, Part Six will explore how different consumer definitions can affect outcomes in several antitrust issues in the pharmaceutical industry that are currently the subject of much debate and rely heavily on consumer definition.

Author Information

Not available