Consumer Protection

6 posts

Gubernatorial Impoundment: An Implied Solution for a Budgeting Challenge

Issues Volume 53, Issue 4

By Zachary Blair

In recent years, states have had to make drastic cuts to their budgets even as the economy flourished in the wake of the Great Recession. The task of balancing state budgets has always been a formidable one, but recent shifts in revenue sources and their ability to generate reliable funding have made this challenge increasingly common and difficult. Historically, states have viewed budget balancing as a fundamentally legislative obligation and prerogative, which is often delegated to the executive branch in the form of impoundment statutes because of the executive’s superior budgeting capabilities.

In several states, however, the legislature has either kept the power to balance the budget for itself or has delegated insufficient discretion to the executive, hampering the state’s ability to meet its constitutional obligation to balance the budget. Consequently, this Note presents an alternative interpretation of the power to impound. It conceives of impoundment as a shared constitutional power exercisable by either the executive or legislature that can be constrained by statute. This interpretation permits the executive to better leverage its strengths in fiscal matters to resolve budget deficits quickly and efficiently, ensuring that the state meets its constitutional obligation to balance the budget.

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Socially Accountable Investing: Applying Gartenberg v. Merrill Lynch Asset Management

Issues Volume 53, Issue 3

By Zachary Barker

In the past several years, the investment management industry has seen the tremendous growth of mutual funds that invest according to principles of socially responsible investment (SRI). What is missing from this growing sector, however, is any oversight as to whether these funds actually accomplish their socially conscious mission. With the Securities and Exchange Commission reluctant to police “social disclosure,” the unregulated promises of these SRI funds present a significant consumer protection risk.

This Note proposes that existing securities laws provide a potential avenue to effective SRI fund regulation without the need for new regulatory action. The rules of fiduciary obligation for mutual fund directors imposed by § 36(b) of the Investment Company Act and the landmark decision Gartenberg v. Merrill Lynch Asset Management, which until now have largely been applied to funds’ financial performance, could easily be adapted by SRI fund investors to ensure a modicum of oversight for those funds’ social performance. State laws governing the management of public benefit corporations, which impose on directors a duty to disclose and compare corporate social performance, can provide potential principles for evaluating social performance.

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The Patent Trap: The Struggle for Competition and Affordability in the Field of Biologic Drugs

Issues Volume 54, Issue 4

By Charlotte Geaghan-Breiner

The biologic drug market in the U.S. suffers from a dearth of competition. Ten years after the passage of the Biologics Price Competition and Innovation Act (BPCIA), competition from biosimilars remains weak, and prices of branded biologics continue to increase at rates that outstrip inflation. This crisis of non-competition has resulted in billions of dollars in lost savings and reduced access to treatment, especially for vulnerable groups. Patent thickets — dense webs of overlapping patents — are one of the main barriers to biosimilar competition. By protecting their products with patent thickets, branded biologic manufacturers are able to deter competition from biosimilars and maintain periods of market exclusivity that far exceed statutory limits. This Note analyzes regulatory gaps in the BPCIA that allow patent thickets to thrive, and recommends both legislative and administrative solutions. Part II assesses the market landscape for biologic drugs in the U.S. and concludes that, of all barriers to biosimilar competition, patent thickets are the most significant. Part III evaluates the BPCIA framework in light of patent thickets and identifies aspects of the statute that allow patent thickets to block biosimilar market entry. Part IV analyzes recent legislative proposals to address the problem of patent thickets, and recommends administrative changes to strike a better balance between innovation and competition in the field of biologics.

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Remedying Public-Sector Algorithmic Harms: The Case for Local and State Regulation via Independent Agency

Issues Volume 54, Issue 2

By Noah Bunnell

Algorithms increasingly play a central role in the provision of public benefits, offering government entities previously unimaginable ways of optimizing public services, but they also pose risks of error, bias, and opacity in government decision-making. At present, many publicly-deployed algorithms are created by private companies and sold to government agencies. Given robust protections for trade secrets in the courts and feeble state open records laws, such algorithms, even those with fundamental flaws or biases, may escape regulatory scrutiny. If state and local governments are to avail themselves of the benefits of algorithmic governance without triggering its potential harms, they will need to act quickly to design regulatory systems that are flexible enough to respond to continual innovation yet durable enough to withstand regulatory capture. This Note proposes a novel regulatory solution in the form of a new, independent agency at the state or local level — an Algorithmic Transparency Commission — devoted to the regulation of publicly-deployed algorithms. By establishing such an agency, tailored to the needs of each jurisdiction, state and local governments can continue to enhance their efficiency and safeguard companies’ proprietary information, while also fostering a greater degree of algorithmic transparency, accountability, and fairness.

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Molecule Size Doesn’t Matter: The Case for Harmonizing Antitrust Treatment of Pay-for-Delay Agreements

Issues Volume 54, Issue 2

By Morgan Marmaro

With notoriously the most-expensive drug prices in the world, the United States has failed to use all of the tools in its shed to combat the unending upwards trend. One such important tool is U.S. antitrust law that targets companies that improperly charge monopoly and supracompetitive prices long past their original patent’s expiration. Some companies have found a way to game the regulatory approval system by suing would-be generic competitors and then, under the guise of settlement, paying them to delay their market entry — allowing a brand drug manufacturer to maintain their monopoly prices and continue raking in large profits. The Actavis Supreme Court found these agreements involving reverse payments — also known as pay-for-delay — can violate antitrust laws even in light of the existing patents. This Note argues that in an ongoing case, In re Humira that examines reverse payments between biologic drug companies, the district court was right to engage in an Actavis analysis but did so improperly. In re Humira provides a prime opportunity to strengthen and clarify U.S. jurisprudence on reverse payments and market allocations to reduce ambiguity in an evolving pharmaceutical sphere: biologics and biosimilars. This Note further argues that to harmonize the antitrust treatment of pharmaceuticals — small molecule and biologic — both clear judicial standards and legislation are needed.

This Note proceeds in four parts. Part II discusses various forms of antitrust abuses that arise in the pharmaceutical sphere and that often accompany reverse payment agreements. It follows with the relevant legal and regulatory backgrounds of small and large molecule drugs. Part III then considers the consequences of lax antitrust scrutiny on pharmaceuticals and finishes with an in-depth examination of the In re Humira litigation. Lastly, Part IV proposes a two-fold solution, legal and legislative, to the problems posed by Actavis’s lack of legal clarity. Ultimately, the purpose of this Note is to demonstrate that the way a drug is manufactured, approved, or allowed to compete does not alter the application of antitrust law seeking to rid the market of collusive agreements between rivals.

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A Critique of Consumer Advocacy Against the Restatement of the Law of Consumer Contracts

Issues Volume 54, Issue 1

By David Berman

In May 2019, the American Law Institute proposed adopting a Restatement of the Law of Consumer Contracts. In it, the Restatement’s Reporters suggested a “grand bargain,” which removed the requirement that consumers meaningfully assent to contractual terms and compensated for this by adding teeth to ex post remedies already available to consumers. The proposed Restatement drew immense criticism from consumer advocates, who argued both that meaningful assent was not disappearing in the common law, and that the ex post remedies did not go far enough to cure consumer harms. In the wake of this critique, the draft was shelved for further consideration.

This Note argues that consumer advocates’ approach to critiquing the Restatement is misguided. Contrary to the position of consumer advocates, the Reporters were fundamentally correct in identifying the gradual demise of assent as a reality in consumer contracts. However, this Note acknowledges that ex post review procedures, such as the application of the unconscionability doctrine, are inadequate mechanisms for redressing consumer harm.

Instead, this Note argues that consumer groups are better served by focusing on ex ante regulation of contract design, which would ensure that consumers are presented with fair contracts. This Note suggests that consumer advocates should focus their attention on the adoption of more rigorous Unfair and Deceptive Acts & Practices statutes on the state level. Provided that the right combination of prohibited terms, administrative updating mechanisms, and enforcement provisions are included, such state-level regulation would better protect consumers from unfair adhesive contracts.

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