Appendix. Economists' Use of Data in Pharmaceutical Antitrust Cases
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APPENDIX
ECONOMISTS’ USE OF DATA IN
PHARMACEUTICAL ANTITRUST CASES
A. Introduction
As this book explains, the pharmaceutical industry (particularly the
segment that involves prescription drugs) differs from many other
industries in terms of its institutional features and the resulting nature of
competition. The federal and state regulatory structure, extensive patent
portfolios, low marginal costs, substantial investments in R&D, relatively
high marketing-to-sales ratios (at least for branded products), and complex
pricing mechanisms are some of its differentiating characteristics. In
addition, unlike many other industries in which the manufacturer or
retailer sells the product directly to the end-user, many intermediaries
stand between the pharmaceutical manufacturer and the patient, including
the physician, payor, and pharmacist, each of whom in some
circumstances may influence the drug that is ultimately dispensed and
consumed.
There are multiple connections among many players in the
pharmaceutical industry, each with different incentives and varying
degrees of exposure to alternative influences. For example, while
physicians often choose specific drugs for their patients based on their own
training and experience prescribing a range of alternatives, they may also
be influenced by medical treatment guidelines, detailing messages from
pharmaceutical representatives, formulary controls established by
reimbursement authorities, and patient requests. Cost-conscious payors
may try to steer patients toward less expensive products by using tiered
copayment structures and formularies that in some cases give
pharmaceutical manufacturers incentives to offer price reductions such as
rebates. Pharmacists may substitute a generic for a comparable brand name
drug based on a number of factors, including legal requirements (such as
mandatory substitution in many states), relative profit margins, and
customer preferences. In addition, patients can be involved in the selection
of particular drugs through requests or inquiries they make, which may be
triggered by differences in the prices they will pay (often linked to
differences in copays) and by direct-to-consumer advertising.
398 Pharmaceutical Industry Antitrust Handbook
Figure 1, which is reproduced from a Rezulin District Court opinion,
illustrates the complex interrelationships between actors in the
pharmaceutical industry. 1
Figure 1. Pharmaceutical Industry Players
Source: Rezulin District Court Opinion, September 21, 2005.
While analysis of the pharmaceutical industry is complicated by the
interconnections illustrated in Figure 1, it is facilitated by the fact that it is
an industry where substantial amounts of data are collected. This
Appendix identifies and discusses many of data sources, noting their
advantages and limitations. In particular, Section B describes data sources
commonly used by economists and provides examples of the questions
these data can help to answer in an antitrust context. Section C provides
illustrative examples of the application of these data in litigation. A list of
the data sources cited in the Appendix along with Internet links are
provided at the end.
B. Data Sources Used by Economists in Antitrust Analyses
Among the data sources used by economists when undertaking studies
of the pharmaceutical industry are: Food and Drug Administration (FDA)
2005).
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