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Should Your Patients Purchase Contact Lenses Elsewhere?

Watch out for third-party contact lens sellers attempting to gain your patients' business.
By Joseph P. Shovlin, OD

11/15/2014

 

Now that I have your attention, I’ll attempt to answer. Third-party sellers want your patients to buy lenses from them, and they’re riled by recent steps some manufacturers have taken on unilateral pricing policies. 

What is unilateral pricing and how has it evolved over the years? In a unilateral pricing policy (UPP), the manufacturer independently (without agreement from resellers) announces a minimum resale price for a product and refuses to further supply a reseller that chooses to sell a product below that price.1-4 The manufacturer is not setting a retail price, but rather is establishing a minimum retail price limit. This policy is designed to encourage retailers to provide patients/consumers with a high level of personalized service, something eye care professionals (ECP) do well.1,3,4

In 2007, the Leegin case rendered a decision that clarified a UPP as the only way a manufacturer can directly influence a reseller’s retail price without subjecting itself to liability for price fixing.3-5

There are two ways in which a purely vertical minimum retail price maintenance (RPM) agreement might be unlawful under federal “rules of reason,” however:3 (1) A dominant retailer might consider RPM to forestall innovation in distribution of the product that decreases its cost, or (2) a manufacturer with market power might use RPM to give retailers an incentive not to sell the products of smaller rivals or new entrants. 

Anticompetitive minimum RPM can also result from collusion or conscious parallelism in concentrated industries. Most states already try to codify their laws into judicial interpretations of analogous federal law. But, federal law is not the only source of antitrust claims.1,3

UPPs and Downs
A debate continues as to whether or not the new pricing policies employed by several major manufacturers are good or bad for consumers. Both sides provide cogent and rational points in their favor. 

There are conceivable benefits for consumers/patients. Unilateral pricing inhibits “free-riding”—when the retailer sells discounted lenses to consumers after the ECP provides the information that leads to the purchase decision, including benefits of one brand over another and how to properly maintain and care for the product. Other benefits include inter-brand competition and potential to bring new products to market.1 This allows resellers to justify the time and effort for services needed to introduce a new product.

One downside for consumers: prices may be higher in some situations than would have otherwise been charged. Also, anti-competitive outcomes are possible.1,5,6 

 This past summer, a Senate hearing on pricing policies and competition pitted manufacturers and the American Optometric Association against groups representing alternative sources for lens purchases. Both sides provided information on consumer centered issues, including the new pricing policies.2 

Among other points, the representatives argued that UPP is another manufacturing tactic to keep patients dependent upon practices. Personally, I’m not sure how this can be interpreted as anti-competitive. Once again, we are made out to be the bad guys for offering both products and services in our practice.

I think a counterargument for protection by ECPs could be made. Online businesses have less money tied up in real estate and sometimes don’t collect state taxes.3 Especially with the introduction of new products, alternative sources for contact lens sales could actually be viewed as a “free rider.”1,3 Additionally, ECP are professionals—we are better equipped to help patients acclimate to their new lenses.  

Of course, regardless of where our patients choose to purchase lenses, we should continue to educate them on new products under unilateral pricing policy and market those products as best we can with confidence from our practice. I suspect despite all the scrutiny, unilateral pricing is here to stay.  

1. Eiden SB, Kassalow J: Impact of unilateral pricing policies. Contact Lens Spectrum. 2014; 9:36-40.
2. www.judiciary.senate.gov/meetings/procong-policies-and-competition-in-the-contact-lens-industry-is-what-you-see-what-you-get
3. Lindsay MA: Resale price maintenance and the world after Leegin. Antitrust. 2007; 22(1).
4. en.wikipedia.org/wiki/Unilateral_policy
5.  www.kansas.com/news/business/biz-columns-blogs/business-perspectives/article1090137.html.
6. www.consumerreports.org/cro/news/2014/08contact-lens-pricing-policy.




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