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In a letter issued today, the staff of the Federal Trade Commission advised the University of Michigan that a proposed modification to reduce costs for its drug benefit program for employees, retirees, and their dependants is exempt from the Robinson-Patman Act, a U.S. antitrust law that prohibits anti-competitive price discrimination.

The Robinson-Patman Act generally prohibits price discrimination in the purchase and sale of certain commodities, where the effect “may be substantially to lessen competition or tend to create a monopoly.” Under the Nonprofit Institutions Act (NPIA), however, eligible entities may purchase – and vendors may sell to them – supplies at reduced prices for the nonprofit’s own use, without violating the Robinson-Patman Act.

The University of Michigan asked the FTC whether a proposal that would allow the University to take advantage of purchasing discounted pharmaceuticals would qualify for the NPIA’s exemption.

According to the FTC staff opinion letter, the proposed program appears to fall within the NPIA. First, the university is an eligible institution under the NPIA. Second, the use of the NPIA-discounted pharmaceuticals in connection with a drug benefit program provided to employees, retirees, and their dependants falls within the “own use” requirement of the statute. Further, the staff letter explains that the program’s structure should ensure that no for-profit entities will benefit from the university’s use of the NPIA-discounted drugs.

NOTE: This letter sets out the views of the staff of the FTC’s Bureau of Competition, as authorized by the Commission’s Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission’s Rules explain, the staff’s advice is rendered “without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding.”

Copies of the staff comment can be found on the FTC’s Web site. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(NPIA Opinion.final)