The Corner Newsletter, December 19, 2019
Welcome to The Corner. In this issue, we discuss Impax Laboratories v. FTC and our latest amicus brief that we submitted in support of the FTC. We hope that all our readers have a happy and safe holiday. The Corner will return on January 9.
Amicus Brief: Impax Laboratories v. FTC
Open Markets Institute filed an amicus brief on Monday in support of the Federal Trade Commission in its case against Impax Laboratories. In the case, the commission unanimously held that Impax engaged in an illegal pay-for-delay agreement, in which Endo Pharmaceuticals paid Impax to abandon its patent challenge and delay market entry of its generic version of the drug Opana ER for 2 1/2 years.
In our brief, we argue that pay-for-delay agreements are a form of per se illegal, horizontal market allocation agreements that seek to prohibit market entry and thus harm market competition. In market allocation agreements, rivals agree not to compete in the same product line, geographic area, or for the same set of customers. Pay-for-delay agreements have the same effect. Thus, similar to the Supreme Court’s 80-year-old holding that market allocation agreements are per se illegal, pay for delay agreements should be per se illegal.
Our brief also argues that the anti-competitive effects of pay-for-delay agreements outweigh any marginal competitive benefit that they may have. One harmful effect includes prolonging a drug patent monopoly, which deprives consumers of a competing drug that could lower prices for consumers, as a 2010 FTC reportdescribed.
Other harms, such as corporations allocating competition or depriving the drug market of a lower-cost competitor, provide more justification why pay-for-delay agreements should be illegal.
Importantly, we argue that the pay-for-delay agreement detailed in this case should be illegal, even under a comprehensive rule-of-reason analysis.
In its holding, the FTC found, citing the Supreme Court’s Actavisdecision, that the agreement between Impax and Endo “provide[s] strong evidence that the patentee seeks to induce the generic challenger to abandon its claim.” The commission further elaborated that a pay-for-delay scheme “would be an irrational act unless the patentee believed that generic production would cut into its profits.” However, the Supreme Court has not ruled that all pay-for-delay agreements illegal. Nevertheless, the commission found that Endo’s market power and the risk of eliminated competition from the agreement were sufficient for Impax to incur liability, too.
The commission justified its holding based on having “ample evidence” of a “real threat” to competition. The commission’s opinion noted that “the relevant anti-competitive harm [with pay-for-delay agreements] occurs when the branded manufacturer and its generic competitor replace the possibility of competition with the certainty of none.”
We strongly urge the Fifth Circuit Court of Appeals to uphold the FTC’s findings, so as to increase competition and to provide the public with cheaper prescription drugs.
You can read our full brief here.
ANTI-MONOPOLY RISING:
The UK government will create a technology regulator next year to police corporations such as Facebook and Google, according to several people involved in the process. The regulator will be given powers to implement an enforceable code of conduct for the biggest corporations, and greater data accessibility for consumers. Andrea Leadsom, secretary of state for the Department for Business, Energy and Industrial Strategy, has pledged to bring out new legislation to reform competition rules in the first quarter of next year, as well as details of a new “digital markets unit.” (Financial Times)
Federal regulators probing Facebook for violations of antitrust law have considered moving to block the tech giant’s plans to integrate its social-networking app with the other services it owns. The legal move would prevent Facebook from merging operations of its core platform with those of photo-sharing app Instagram and the messaging service WhatsApp, which Facebook acquired in 2012 and 2014, respectively. (The Washington Post)
The California Consumer Protection Act will take effect on January 1. The CCPA (full text here) will be the strictest digital privacy law in the United States and the first law in the country that gives adults some rights over the collection of their data. (Vox Recode)
The New York Times and the Financial Times both named Christopher Leonard’s blockbuster new book Kochland: The Secret History of Koch Industries and Corporate Power in America one of the best books of 2019. Leonard tells the riveting and disquieting story of the rise of Koch Industries, how its infamous owners built their company into the dominant global behemoth it is today, and what the rise of Koch Industries can tell us about the dismal state of economic opportunity and democracy today.
WHAT WE’VE BEEN UP TO:
Matt Buck’s Washington Monthly article was featured in The New York Times as a story “you shouldn’t miss.” The Times wrote, “Speaking of tech giants, an article in Washington Monthly argued that Amazon, Apple and Google should stay out of health care. The piece, by Matthew Buck of the Open Markets Institute, said the tech companies’ drive to maximize corporate revenues could skew the development of health technology away from the best interests of patients and toward overtreatment.”
Barry Lynn and Open Markets Institute were featured in a Yahoo Finance article about the growing movement behind corporate concentration and antitrust. The piece highlights major voices in the space and quoted Bill Kovacic, a George Washington University law professor, who said that “in five years, Barry and his group have changed the debate. They’ve gone from being a largely unnoticed fringe body of commentary to being at the very center of the debate.”
Michael Bluhm’s white paper on drug monopolies was listed in Politico’s “Document Drawer” as part of their widely read newsletter Prescription Pulse, which examines the latest pharmaceutical news and policy.
Barry Lynn spoke at a Charles River Associates conference in Brussels about market power and economic democracy. In discussing the dangers of Google, Facebook, and Amazon, Lynn said, “Two things make these corporations so dangerous. First is their control of the gate to the market. If you want to sell something or say something or see something or learn something, you really can’t do it without riding their rails. Second is their license to discriminate — to treat each and every buyer and seller differently.”
Sally Hubbard spoke with The Washington Post about possible legal action to stop Facebook from integrating WhatsApp and Instagram with the Facebook platform. “At a time when Facebook is under scrutiny for its monopoly power and its abuses of its power, to say it’s going to integrate these three platforms is just another monopoly grab,” she said.
VITAL STAT: 1,992
The total number of reported merger transactions in 2017 – a 12% increase over last year and the highest number of reported transactions in the past 10 years.
WHAT WE’RE READING:
“Insulin Should Be Free. Yes, Free.” (Democracy Journal, Merrill Goozner): How concentrated insulin markets result in high prices for consumers and why this lifesaving drug should be free.
“How to Take Back Control From the Big Tech Barons” (Financial Times, Rana Foroohar): How the modern technology robber barons, like those of the past, use their financial wealth to extract influence from government, but their ability to influence the public by utilizing behavioral advertising makes them more of a threat to our democracy.
“How McKinsey Infiltrated the World of Global Public Health” (Vox, Julia Belluz and Marine Buissonniere): How members of McKinsey and other consulting companies have infiltrated global organizations to purchase their services.
Written by: Barry Lynn, Phil Longman, and Daniel Hanley
Edited by: Barry Lynn, Phil Longman, Daniel A. Hanley, Krista Brown, Udit Thakur, and Michael Bluhm.