Vaccine bundling is a contractual agreement offered by some pharmaceutical companies to pediatricians, that gives a discount to doctors purchasing pediatric vaccines, but only if the physicians agree to buy the majority of their vaccines from a single manufacturer. [1] It is a form of product bundling.
Many pediatric practices struggle to remain profitable as the cost to administer vaccines has increased. [2] By some estimations, vaccines can have the second highest impact on a pediatric practice's finances. [3] As a result of these and other factors, many pediatricians have joined group purchasing organizations as a way to leverage their purchasing power and take advantage of the reduction in prices for vaccines and other products.[ citation needed ]
While this aggregation of buying power allows pediatricians to negotiate lower prices for products, concerns have been raised by economists and consumer groups that the bundling contracts that require pediatricians to buy all of their vaccines from one company inhibit competition, impede the introduction of new vaccines, reduce physician choice and, ultimately, drive up the costs of vaccines to physicians, the government, and taxpayers. [4] In response to this criticism, pharmaceutical companies have stated bundling is one of the options available to pediatricians, and the contracts are lawful and provide real value. [5]
On January 3, 2012, the economic consulting firm Compass Lexecon published a white paper on the Social Science Research Network titled “The Effects of Bundled Discounts on Entry in the Market for Pediatric Vaccines.” The paper stated the strategic goal of pediatric bundling is to make it more difficult for rival vaccine makers to enter a new market. [6] The paper said that the long-term effects of bundling are:
The authors concluded vaccine bundling is inconsistent with the goals of the National Vaccine Program Office and at odds with public health.[ citation needed ]
A separate analysis, funded by the Swiss pharmaceutical company Novartis, concluded vaccine bundling and other factors could result in elevated prices, stifled investment, innovation in the vaccine sector, and degradation in the quality, reliability and availability of existing and future pediatric vaccines. [6]
Possible legal issues with the marketing of vaccine bundles by Sanofi Pasteur Inc and Merck & Co. were first brought to the Federal Trade Commission (FTC) in July 2010 by the watchdog group Citizens for Responsibility and Ethics in Washington (CREW). [7] Subsequently, the American Antitrust Institute wrote to the FTC in November 2011, requesting an investigation into anticompetitive practices in the pediatric vaccine market. [4] In both letters the restrictive nature and possible penalties for breaking the bundling contracts were highlighted as the reason for requesting an investigation.[ citation needed ]
A third letter to the FTC sent on March 19, 2012, [1] cited a former Sanofi employee to support allegations that the companies are engaged in anticompetitive [8] bundling [9] practices.
In response, both companies stated the agreements are well intended and lawful, telling The Hill that the contracts meet customer needs and maximize immunizations rates which protect public health. [1]
The FTC has acknowledged it received the letters, but does not comment on investigations unless wrongdoing is found. [5]
Two class action lawsuits have been filed charging Sanofi Pasteur Inc. with violating U.S. antitrust laws, as a result of its bundling practices. [10] [11] The suits challenge Sanofi's alleged “anticompetitive scheme” [12] to maintain its monopoly in the U.S. meningitis vaccine market. [13] [14] These lawsuits have since been consolidated. [15]
In both cases, plaintiffs were parties to exclusionary contracts with Sanofi Pasteur to purchase vaccines. Each plaintiff wanted to purchase a different meningitis vaccine manufactured by Novartis that they thought to be superior. According to documents, if they purchased this vaccine and therefore did not use Sanofi's pediatric vaccines exclusively, they would have to pay Sanofi 15 to 34 percent higher prices for all Sanofi vaccines. [15] The lawsuits claim that, due to Sanofi's prominence in the vaccine market, the contracts make it virtually impossible for competitors to gain any market share. Sanofi responded that there are alternatives to all of the vaccines in the bundle, and that Novartis already has 20 percent of the market share for its competing vaccine. [16]
In defending its practices, Sanofi contended the plaintiffs did not claim they were coerced by the bundling into not purchasing other vaccines, and did not have standing to sue because the bundling contracts were negotiated by physician buying groups, not the individual doctors themselves, and therefore only those groups would have standing. [16]
The cases are currently pending in U.S. District Court for the District of New Jersey.[ citation needed ]
The Sherman Antitrust Act of 1890 is a United States antitrust law which prescribes the rule of free competition among those engaged in commerce. It was passed by Congress and is named for Senator John Sherman, its principal author.
The Robinson–Patman Act (RPA) of 1936 is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.
In the United States, antitrust law is a collection of mostly federal laws that regulate the conduct and organization of businesses to promote competition and prevent unjustified monopolies. The three main U.S. antitrust statutes are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts serve three major functions. First, Section 1 of the Sherman Act prohibits price fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization.
Novartis AG is a Swiss multinational pharmaceutical corporation based in Basel, Switzerland. Consistently ranked in the global top five, Novartis is one of the largest pharmaceutical companies in the world and was the fourth largest by revenue in 2022.
Anti-competitive practices are business or government practices that prevent or reduce competition in a market. Antitrust laws ensure businesses do not engage in competitive practices that harm other, usually smaller, businesses or consumers. These laws are formed to promote healthy competition within a free market by limiting the abuse of monopoly power. Competition allows companies to compete in order for products and services to improve; promote innovation; and provide more choices for consumers. In order to obtain greater profits, some large enterprises take advantage of market power to hinder survival of new entrants. Anti-competitive behavior can undermine the efficiency and fairness of the market, leaving consumers with little choice to obtain a reasonable quality of service.
Shantha Biotechnics Limited is an Indian biotechnology company headquartered in Hyderabad, India. It is the first Indian company to develop, manufacture and market recombinant human healthcare products in India. The company is a wholly owned subsidiary of Sanofi group.
Jonathan David Leibowitz is an American attorney who served under President Barack Obama as Chair of the Federal Trade Commission (FTC) from 2009 to 2013. Leibowitz was appointed to the commission in 2004, and resigned in 2013. During Leibowitz's tenure, the FTC brought privacy cases against Google, Facebook and others for violating consumer privacy, as well as enforcement against "pay-for-delay" deals in which pharmaceutical companies paid competitors to stay out of the market. Prior to joining the FTC, Leibowitz was Vice President for Congressional Affairs from 2000 to 2004 of the MPAA.
AMD v. Intel was a private antitrust lawsuit, filed in the United States by Advanced Micro Devices ("AMD") against Intel Corporation in June 2005.
Aspen Pharmacare Holdings Limited is a public multinational pharmaceutical company headquartered in uMhlanga, South Africa. Founded in 1997, it listed on the Johannesburg Stock Exchange (JSE) in 1998, and purchased South African Druggists in 1999 before expanding into international markets. Currently the largest pharmaceutical company in Africa through aggressive mergers and expansion, with major manufacturing sites in locations such as Gqeberha in South Africa, Bad Oldesloe in Germany, Notre-Dame-de-Bondeville in France, and Oss, Netherlands, Aspen is known for manufacturing and distributing branded pharmaceuticals as well as generic HIV/AIDS antiretrovirals (ARVs) and cancer medications. Among other products, Aspen has also been involved in manufacturing the Janssen COVID-19 vaccine through "fill and finish", and has the rights to sell the product under its own brand name Aspenovax. The company's revenue in 2022 was R38.6 billion. In 2016 Aspen was fined for high prices on cancer drugs, and after an investigation Aspen committed to reduce prices for 5 years in the European Union.
FTC v. Actavis, Inc., 570 U.S. 136 (2013), was a United States Supreme Court decision in which the Court held that the FTC could make an antitrust challenge under the rule of reason against a so-called pay-for-delay agreement, also referred to as a reverse payment patent settlement. Such an agreement is one in which a drug patentee pays another company, ordinarily a generic drug manufacturer, to stay out of the market, thus avoiding generic competition and a challenge to patent validity. The FTC sought to establish a rule that such agreements were presumptively illegal, but the Court ruled only that the FTC could bring a case under more general antitrust principles permitting a defendant to assert justifications for its actions under the rule of reason.
FTC v. Motion Picture Advertising Service Co., 344 U.S. 392 (1953), was a 1953 decision of the United States Supreme Court in which the Court held that, where exclusive output contracts used by one company "and the three other major companies have foreclosed to competitors 75 percent of all available outlets for this business throughout the United States" the practice is "a device which has sewed up a market so tightly for the benefit of a few [that it] falls within the prohibitions of the Sherman Act, and is therefore an 'unfair method of competition' " under § 5 of the FTC Act. In so ruling, the Court extended the analysis under § 3 of the Clayton Act of requirements contracts that it made in the Standard Stations case to output contracts brought under the Sherman or FTC Acts.
LePage's Inc. v. 3M, 324 F.3d 141, is a 2003 en banc decision of the United States Court of Appeals for the Third Circuit upholding a jury verdict against bundling. Bundling is the setting of the total price of a purchase of several products or services over a period from one seller at a lower level than the sum of the prices of the products or services purchased separately from several sellers over the period. Typically, one of the bundled items is available only from the seller engaging in the bundling, while the other item or items can be obtained from several sellers. The effect of the bundling is to divert purchasers who need the primary product to the bundling seller and away from other sellers of only the secondary product. For that reason, the practice may be held an antitrust violation as it was in the LePage's case, in which the Third Circuit held that 3M engaged in monopolization in violation of Sherman Act § 2 by (1) offering rebates to customers conditioned on purchases spanning six of 3M's different product lines, and (2) entering into contracts that expressly or effectively required dealing exclusively with 3M.
Software monetization is a strategy employed by software companies and device vendors to maximize the profitability of their software. The software licensing component of this strategy enables software companies and device vendors to simultaneously protect their applications and embedded software from unauthorized copying, distribution, and use, and capture new revenue streams through creative pricing and packaging models. Whether a software application is hosted in the cloud, embedded in hardware, or installed on premises, software monetization solutions can help businesses extract the most value from their software. Another way to achieve software monetization is through paid advertising and the various compensation methods available to software publishers. Pay-per-install (PPI), for example, generates revenue by bundling third-party applications, also known as adware, with either freeware or shareware applications.
Federal Trade Commission v. Qualcomm Incorporated was a noted American antitrust case, in which the Federal Trade Commission (FTC) accused Qualcomm's licensing agreements as anticompetitive, mainly because their practices excluded competition and harmed competitors in the modern chip market, which according to the FTC, violated both Section 1 and Section 2 of the Sherman Act. On May 21, 2019, the United States District Court for the Northern District of California ruled in favor of the plaintiff, the FTC, by alleging that Qualcomm had indeed violated the federal antitrust laws by (1) refusing to license its patents to direct competitors, in its relevant product market (2) by placing an extra fee on rival chip sales through its licensing of its patent, and (3) by entering in an exclusive business deal with Apple from 2011 to 2013. The case was seen as controversial when the United States Court of Appeals for the Ninth Circuit decided to unanimously reverse the decision of the district court by arguing that the FTC failed to prove through its rule of reason analysis that Qualcomm's policies have a considerable negative effect towards the consumer in the CDMA and cellular chips market.
Paul Hudson is a British businessman, and the chief executive (CEO) of Sanofi, the world's fifth largest pharmaceutical company by prescription drug sales.
Federal Trade Commission, et al. v. Amazon.com, Inc. is a lawsuit brought against the multinational technology company and online retailer Amazon in 2023. The Federal Trade Commission (FTC), joined by the attorneys general of seventeen U.S. states, alleges that Amazon holds and abuses an online retail monopoly.
