Economics at the FTC: Drug and PBM Mergers and Drip Pricing

Authors:
Howard A. Shelanski, Joseph Farrell, Daniel Hanner, Christopher J. Metcalf, Mary W. Sullivan, and Brett W. Wendling

Economists at the Federal Trade Commission (FTC) pursue the agency’'s competition and consumer protection missions. In this year’'s essay, in antitrust, we discuss two recent mergers that involved Rx drugs: First, we describe key elements of the inquiry into the Express Scripts (ESI)/Medco transaction in the pharmacy benefit management (PBM) industry. Next, we analyze a merger that involved drugs that are used to treat patent ductus arteriosus: a condition that affects premature babies. On the consumer protection side, we discuss a pricing strategy – drip pricing – that involves the release of price information about a multi-part product over time as the consumer goes through the purchase process.