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Rx DRUG RESALE BY NON-PROFITS IS AN UNFAIR COMPETITION ISSUE, FTC's ZUCKERMAN TELLS NARD CONVENTION: EXAMPLE OF PROBLEMS WHICH ARISE FROM GOVT. INTRUSION

Executive Summary

Outpatient drug sales by not-for-profit organizations probably represents a problem of unfair competition for independent pharmacies, FTC Bureau of Competition Director Jeffrey Zuckerman told the National Association of Retail Druggists' annual convention in Las Vegas Oct. 19. In a discussion of predatory pricing issues during the convention's "Town Meeting" session, Zuckerman discussed the competition from non-profits as a related issue. Noting that it is not technically a predatory pricing problem "because it's people who are not really pricing below their cost," Zuckerman said it appears to be "an unfair competition issue nonetheless." The FTC staffer began his presentation with the disclaimer that his remarks do not necessarily represent official commission positions. Zuckerman referred to the non-profit situation to emphasize his position of government non-involvement. The problem exists, Zuckerman asserted, "precisely because the government has given certain competitors an advantage over other competitors by making them exempt from taxes." He continued: "it is a classic example of what can happen when the government, perhaps with all good intentions, interferes in the market on behalf of some small interest group." The NARD Town Meeting revolved around the topic of predatory pricing and FTC's role in independent pharmacy complaints on the subject. In the first half of the fiscal year ending Sept. 30, 1987, the Bureau of Competition received approximately 16 complaints alleging predatory pricing, Zuckerman said. However, he maintained that on investigation, none were recognized by FTC as actual situations. FTC's investigations into the complaints were reported by the commission in an April 1 report to Congress on the first five months of the fiscal year. "What it boiled down to," Zuckerman said, "was someone would come in and say there was a predatory pricing and we would go back and say, 'can you give us more information' -- and we wouldn't hear from them again. In the majority, that's the result we got." Zuckerman promised the continued investigation of any complaint received, cautioning: "But we will do so, as I said at the outset, with a conscious determination not to deter hard price competition in any way whatsoever." During Q-&-A following his presentation, Zuckerman was asked about the commission's rationale in filing a brief on behalf of Wal-Mart in a predatory pricing suit filed against the chain by Oklahoma independent pharmacists. The suit was filed under Oklahoma's fair trade act. Explaining the FTC's "general position" in that case, Zuckerman said that "the general idea is that there [state] statutes require sales not just above cost, but [include] a certain margin in an attempt to keep prices higher than a truly competitive market would generate. That's why we tend to view these statutes as anti-consumer." Zuckerman was also asked whether the FTC would consider a violation of anti-trust laws a situation where a physician would refuse to give a prescription to a patient unless the patient agrees to have the prescription filled by the physician. "Probably not," Zuckerman said. He added, however that he told a state board, when asked "informally," that the commission would "probably" not object to a state requiring physicians to post a sign reminding patients of their right to purchase prescriptions from pharmacies. "That's just a matter or providing information," Zuckerman pointed out.
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