FTC Testifies on Proposed Antitrust Exemption for Community Pharmacies

The Federal Trade Commission testified today before Congress about proposed legislation that would exempt independent pharmacies from the antitrust laws, saying that such an exemption is likely to reduce competition and innovation, and ultimately increase prices for health care consumers in the United States.

Testifying before the U.S. House Judiciary Committee's Subcommittee on Intellectual Property, Competition, and the Internet, the FTC's Bureau of Competition Director Richard Feinstein said that the bill, H.R. 1946, "Preserving Our Hometown Independent Pharmacies Act of 2011," would create an antitrust exemption that would allow pharmacies to engage in collective bargaining to secure higher fees and more favorable contract terms from health plans.

According to the FTC's testimony, the collective bargaining contemplated by H.R. 1946 would likely lead to higher health care costs due to diminished competition. Health plans would be forced to pay higher drug dispensing fees to pharmacists, undermining the plans' ability to control drug costs, the testimony states, which in turn would lead to higher insurance premiums, or changes in coverage such as increased deductibles or higher co-pays.

"Although the Commission is sympathetic to the difficulties community pharmacies face, the proposed [antitrust] exemption threatens to raise prices to consumers for much-needed medicine, which would have an especially dire impact on seniors," Feinstein said. "It also threatens to increase the cost to employers who provide health care insurance to employees and retirees, which may cause those employers to reduce or eliminate benefits. And there is no assurance that the proposed exemption would produce any offsetting higher quality care."

The testimony concluded by stating that, "[p]olicymakers have been exploring ways to address widespread concerns about our health care system, including ways to stem spiraling costs and improve quality. Giving health care providers – whether pharmacies, physicians, or others – a license to engage in price fixing and group boycotts aimed at extracting higher payments from third-party payers would be a costly step backward, not forward, on the path to a better health care system."

The Commission vote approving the testimony was 4-0.

The FTC's Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.