PharMax, a pharmaceutical manufacturer, sells its drugs for use in not-for-profit hospitals at a lower wholesale price than the price given to commercial pharmacies. CPC Inc., a commercial pharmacy chain, files suit alleging a violation of the price discrimination laws. What is the likely outcome of the suit?

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Question:

PharMax, a pharmaceutical manufacturer, sells its drugs for use in not-for-profit hospitals at a lower wholesale price than the price given to commercial pharmacies. CPC Inc., a commercial pharmacy chain, files suit alleging a violation of the price discrimination laws. What is the likely outcome of the suit?

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Answer:CPC Inc. will probably lose the suit.Explanation:The Robinson-Patman Act contains the regulations that govern price discrimination. The purpose of this Act is to prevent unfair competition. The Act sets forth that a business must sell its products at the same price regardless of who the purchaser is. However, in the question at issue, there is a not-for-profit hospital involved, which is the buyer of the drugs. In this case, PharMax may resort to the Non-Profit Institutions Act (NPIA), which is the exemption to the Robinson–Patman Act referred to above, and claim that according to the NPIA, pharmaceutical manufacturers are entitled to sell hospitals, libraries and universities (non-profit institutions), discounted products. As a consequence, the hospital shall receive the drugs at a lower price than that charged to other retail pharmacy. To sum up, there is no violation of the price discrimination laws and CPC Inc. will lose the lawsuit.  

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