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Written Testimonies & Filings Written Statement of Geoffrey A. Manne on “Antitrust Concerns and the FDA Approval Process” U.S. House of Representatives Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial, and Antitrust Law.
Written Statement of Geoffrey A. Manne on
U.S. House of Representatives Committee on the Judiciary, Subcommittee on Regulatory Reform, Commercial, and Antitrust Law
Poorly drafted regulations, especially in heavily regulated industries, can create opportunities for anticompetitive abuse. Established companies know how to navigate regulatory mazes, and the complexities of such regimes create innumerable opportunities for nominal compliance at the expense of competition, innovation, and new entry.
The legislative and regulatory impulse when faced with deeply entrenched regulations and their competitive manipulations is often to pile on, either with even more-complex regulatory amendments or else antitrust enforcement that side-steps the root problem, focusing on “fixing” allegedly anticompetitive conduct rather than reforming the underlying laws that facilitate it.
But the government has a questionable track record in promoting competition, not infrequently adopting policies seemingly tailor-made to perpetuate, rather than constrain, harmful conduct.
The FDA Act and the regulations promulgated under it by the agency stand as Exhibit A in this regard. Last year’s controversy over Mylan Pharmaceuticals’ price hike on the EpiPen, for example, is symptomatic of the problem. The market for pharmaceuticals is complicated, but one thing seems clear in the pricing controversy: the FDA has been an effective ally for Mylan in keeping out competitive producers of generic epinephrine auto-injectors. Drug safety is important, of course, but since 1962 the FDA has also reviewed drugs for “efficacy,” which introduced massive delay and uncertainty, arguably without concomitant benefit. And the FDA’s approval and oversight processes for generics and biosimilars, although improved since 1962, continue to impede effective entry. Thus, with the field clear of competitors, it is no surprise that Mylan was able to raise prices. Only following the angry public outcry did the FDA finally accelerate its review process and approve a competing product last month.
But efficacy review is not the FDA’s only regulatory cul de sac through which pharmaceutical manufacturers can employ regulatory policies to keep unwanted competitors off the block. In particular, one aspect of the FDA’s drug safety oversight regime has emerged as a device for some manufacturers to delay generic entry: the Risk Evaluation and Mitigation Strategies, or “REMS,” program.
What I will refer to collectively as the FDA Act’s REMS program comprises two elements that are relevant here: First, it requires branded drug manufacturers to make samples of their drugs available to would-be generic entrants so that they can use them in the lengthy safety and efficacy testing process required to secure FDA approval. Second, it requires brand drug companies to adopt a concerted set of practices and policies aimed at mitigating the risks inherent in the use of most drugs, and additional, more restrictive practices to ensure the safe use of particularly dangerous or addictive drugs — the so-called “REMS with ETASU” (“Elements to Assure Safe Use”). The program also requires that brand manufacturers allow generic entrants to share in these enhanced mitigation processes in order, presumably, to streamline the process and economize on compliance costs.
By forcing collaboration between competitors, the REMS program is practically tailor-made for problems. Although the FDA Act specifically prohibits the use of these regulatory elements to block lower-cost, generic alternatives from entering the market (of course), almost immediately following the law’s enactment, a small handful of branded pharmaceutical companies began using REMS for just that purpose (also, of course).
Some (now-former) FTC commissioners, among others, have raised concerns that brand drug manufacturers can (and do) take advantage of these provisions by adopting tough negotiating positions that, they allege, amount to anticompetitive exclusion requiring agency enforcement. I believe that that would be decidedly the wrong approach to dealing with the issue. These are not properly antitrust problems; they are problems of poor regulatory design.
But it is also true that the program itself exists to implement an underlying policy that may be even worse, and it is likely that reforming a few key elements of the program would help prevent such abuses — but Congress should adopt more fundamental policy changes, as well.
The first part — sharing samples — cannot easily be fixed by removing the required collaboration, at least not without completely revamping (or removing) the FDA’s drug safety and efficacy oversight function (however desirable reform of these functions would be). But the second — sharing REMS programs — can be.
Read the full statement here.
Presentations & Interviews Geoffrey Manne joins Chris Segers and Anthony Bianco on CNBC for a discussion of Amazon's size and how it is expected to grow. WATCH: Video
Geoffrey Manne joins Chris Segers and Anthony Bianco on CNBC for a discussion of Amazon’s size and how it is expected to grow.
TOTM Last week the editorial board of the Washington Post penned an excellent editorial responding to the European Commission’s announcement of its decision in its Google . . .
Last week the editorial board of the Washington Post penned an excellent editorial responding to the European Commission’s announcement of its decision in its Google Shopping investigation. Here’s the key language from the editorial…
Read the full piece here.
Presentations & Interviews AUDIO: Listen
Geoffrey Manne joined KCRW’s To the Point podcast to discuss Amazon and the retail revolution. The full episode is embedded below.
ICLE White Paper The agriculture sector has seen significant technological innovation and organizational change over the last two decades, leading to increases in both farm productivity and profitability.
The agriculture sector has seen significant technological innovation and organizational change over the last two decades, leading to increases in both farm productivity and profitability. These scientific breakthroughs, most notably in crop protection science biotech seed traits and precision farming, were the result of substantial research and development (“R&D”) investment. Further, these technological breakthroughs were accompanied by organizational changes — e.g., increasing vertical and horizontal collaboration — that have enabled an increasingly complex industry to productively implement them.
In recent years the need to innovate has only increased. As technology in the sector continues to evolve, companies are increasingly adapting with structural changes to enable more effective R&D. These adaptations include increased collaboration between companies and, at times, integration of firms through mergers and acquisitions (“M&A”). This M&A activity has harmed neither competition, innovation, or investment by new entrants. In fact, combining businesses with complementary R&D has spurred innovation and accelerated the development and deployment of new products, one of the primary goals of the antitrust laws. Advances in biotechnology, crop protection science, and AgTech have provided farmers with increasingly sophisticated tools to meet the challenges of increasing demand for food and diminishing natural resources. Far from harming innovation, M&A activity in the agriculture industry has been accompanied by tremendous increases in R&D spending by existing and new companies and enhanced agricultural productivity.
Criticisms of agricultural industry M&A activity — and to the current, proposed Bayer-Monsanto and Dow-DuPont mergers in particular — are based on one or more of several common misconceptions about the industry, innovation, competition, and the deals themselves. This paper identifies and responds to several of those misconceptions, focusing in particular on the claims raised in a 2016 working paper produced by the Agricultural and Food Policy Center at Texas A&M University, entitled Effects of Proposed Mergers and Acquisitions Among Biotechnology Firms on Seed Prices (“Texas A&M Report” or “Report”).1 Fundamentally, the Texas A&M Report incorporates flawed or incomplete antitrust law and economics in its condemnation of the pending mergers by alleging likely harms without considering their likely countervailing and procompetitive benefits. Further, the potential harms alleged are premised on unsound or outdated economic theory, or rooted in inconsistent or inaccurate characterizations of the deals, the industry, and its competitive dynamics. The Report’s substantial flaws make it an unsuitable guide to proper antitrust policy regarding the proposed deals.
Presentations & Interviews Summary As the internet economy matures, antitrust regulators around the world have increasingly turned their sights on internet companies. However, the dynamic nature of online . . .
As the internet economy matures, antitrust regulators around the world have increasingly turned their sights on internet companies. However, the dynamic nature of online competition — with low barriers to entry, a heavy reliance on data-driven innovation, and the interlinked nature of multi-sided markets — calls into question some common assumptions of antitrust law and merits a more sophisticated analysis of market competitiveness. In this event, participants will examine such themes as the competitive significance of data, considerations in the analysis of multi-sided markets, and the nature of platform competition.
The event featured:
TOTM According to Cory Doctorow over at Boing Boing, Tim Wu has written an open letter to W3C Chairman Sir Timothy Berners-Lee, expressing concern about a proposal . . .
According to Cory Doctorow over at Boing Boing, Tim Wu has written an open letter to W3C Chairman Sir Timothy Berners-Lee, expressing concern about a proposal to include Encrypted Media Extensions (EME) as part of the W3C standards.
Regulatory Comments "On behalf of the R Street Institute, the Competitive Enterprise Institute, TechFreedom, and the International Center for Law & Economics, we respectfully submit these comments in response to the California Department of Motor Vehicles’ proposed Driverless Testing and Deployment Regulations released on March 10, 2017..."
“On behalf of the R Street Institute, the Competitive Enterprise Institute, TechFreedom, and the International Center for Law & Economics, we respectfully submit these comments in response to the California Department of Motor Vehicles’ proposed Driverless Testing and Deployment Regulations released on March 10, 2017. We believe the proposed regulations better serve the people of California—not only in terms of safety, but in terms of consumer welfare more generally. We are particularly cognizant of the DMV’s demonstrable commitment to an iterative approach to this rulemaking. On that basis and in that spirit, we believe that further revisions are necessary.”
TOTM On Thursday, March 30, Friday March 31, and Monday April 3, Truth on the Market and the International Center for Law and Economics presented a blog symposium . . .
On Thursday, March 30, Friday March 31, and Monday April 3, Truth on the Market and the International Center for Law and Economics presented a blog symposium — Agricultural and Biotech Mergers: Implications for Antitrust Law and Economics in Innovative Industries — discussing three proposed agricultural/biotech industry mergers awaiting judgment by antitrust authorities around the globe. These proposed mergers — Bayer/Monsanto, Dow/DuPont and ChemChina/Syngenta — present a host of fascinating issues, many of which go to the core of merger enforcement in innovative industries — and antitrust law and economics more broadly.
