On the other hand, there are possible anticompetitive effects. Drug companies could prefer their own products in closed or hybrid formularies, thereby excluding independent drug company products from a substantial share of the market. If it is true that independent drug companies are impeded in efforts to get to the market through these vertical mergers, drug prices could increase. Another possibility is that these mergers will trigger a trend toward closed formularies which may offer some short term efficiencies to consumers but long term will raise the specter of higher drug prices. This kind of reciprocal trading of preferences arguably will undermine the ability of non-vertically integrated drug companies to compete effectively.
Closed formularies are the exception rather than the rule.
Physicians and insurers tend to resist formularies that impair their ability to select the drug they regard as most appropriate for particular patients. If a drug company attempts to use a closed formulary to prefer its own products, the payment group might be sufficiently alert to switch to the open formulary, maintained as a result of the Commission order, and thereby defeat any anticompetitive strategy. Finally, reciprocal preferences among vertically integrated drug companies would not be an easy arrangement to introduce or monitor and in any event would be fairly obvious to physicians and payment groups - and of course to the government. In response to this array of considerations, the Commission approved a negotiated consent order with Lilly, along the lines I have described, but then added the following statement. The Commission believes that, based on the evidence currently before it, this Order provides the most appropriate relief available.