The Superiority of Direct Proof of Monopoly Power and Anticompetitive Effects in Antitrust Cases Involving Delayed Entry of Generic Drugs

Branded prescription pharmaceutical manufacturers in recent years have gone to great lengths to delay the market entry of less expensive, but otherwise functionally identical, generic versions of their brand-name products, spawning multiple lawsuits against pharmaceutical companies challenging these efforts under the federal antitrust laws. This article explores how plaintiffs may prove monopoly or market power in these cases. The authors argue that given certain institutional features of the prescription drug business, and the well-understood effects of generic competition, including rapid market substitution of the less expensive generics for the brand, plaintiffs should be able to prove monopoly power in these cases with direct evidence that impeding generic competition artificially inflates prices well above the competitive level. The authors argue further this direct evidence should be sufficient by itself to prove that delaying generic entry maintains or enhances monopoly power, thereby obviating any need to prove monopoly power indirectly by defining a relevant market and showing that the defendant has a higher share of the defined market. Finally, the article argues that the same institutional features pertinent to direct analysis of market power, including extensive efforts at product differentiation between drug molecules, the presence of non--price competition, the relatively low cross-elasticity of demand between brands, constitute substantial evidence that the relevant market for analyzing the effects of impeded generic competition includes only the brand and its generic substitutes.

The article is available at http://ssrn.com/abstract=1586998.