Antitrust, Pharmaceutical, Product Hopping, Intellectual Property, Patent, Anticompetitive Agreement
Patents grant time-limited market exclusivity to drug manufacturers, meaning that other companies are prohibited from copying and selling the patented pharmaceutical. This allows manufacturers to lawfully charge monopoly prices. Generic competition starts at the expiration of the patent. To maintain coveted monopoly power, manufacturers often release an alternative formulation of the drug with a fresh patent that enjoys continued market exclusivity. Manufacturers who can convert their consumer base to the new formulation can continue charging peak prices. This process, called “product hopping,” has been the target of significant antitrust inquiry, with mixed results.
A product hop may be the result of legitimate innovation if a manufacturer releases a superior product and consumers voluntarily switch, or it may involve steering consumers to the new formulation through artificial means. A product hop that is not based purely on the merits of the product requires a web of anticompetitive agreements involving Pharmacy Benefit Managers (“PBM”s), insurance companies, pharmacies, and prescribers. Manufacturers use these secret agreements to keep generic competitors at bay by steering patients towards newly patented formulations. This Note shows that pharmaceutical product hopping sits at the center of a network of antitrust violations: it is anticompetitive by association when combined with tying, exclusive dealing, market foreclosure, and other anticompetitive agreements, regardless of the nature of the product hop itself.
Victoria Field, Note, Renewing Faith in Antitrust: Unveiling the Hidden Network Behind Pharmaceutical Product Hopping, 28 Fordham J. Corp. & Fin. L. 149 (2023).