For Consumers: More Ecommerce, More Gray Market … Please

For Consumers: More Ecommerce, More Gray Market … Please
The PRECISION1® family of daily disposable contact lenses (Photo: Business Wire)
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A key element in the aftermath of any crisis is assessing what policies worked, what policies didn’t work, and determining if those working policies should be retained after the crisis comes to a close.  A corollary to this is seeing if those successful policy ideas can be applied in other policy areas.

As the Covid-19 crisis rockets towards an ending (with states and localities well-underway in ending their states of emergency), thoughtful policymakers will be doing just that:  looking at what policies worked, should be maintained, and perhaps ought to be expanded and applied in other areas.

Among the most-important lessons from Covid-19 is how eager the public embraced a variety of “touchless” options for commerce.  From increased ecommerce usage to curbside pick-up, consumers did like the idea of buying goods with a limited amount of interaction with those selling those goods (akin to how America embraced the idea of self-service gas stations where they could pay at the pump).

At the federal level, the Biden Administration could apply this in a myriad of ways—including in the area of contact lens regulation.  Setting aside Europe’s handling of Covid-19, and the general over-regulation of the marketplace in the EU, at least in Europe, one need not visit an eye doctor in order to get contact lenses.  In some countries, one can even buy contact lenses from a vending machine!

The same thing could happen here in the United States.  All that needs to happen is for the federal Food and Drug Administration to take a much-lighter touch when it comes to regulating contact lenses and the contact lens marketplace. In the same way that regulatory relaxation was one of a few bright lights during the Covid-19 crisis, American consumers would love this… and the potential for increased competition would also reduce prices for consumers, something that working families would certainly embrace as inflation is driving up consumer prices elsewhere.

The Gray Market Is Good for Consumers of Contact Lenses

Selling things online is easier than ever. However, ‘brick-and-mortar’ operations — you know, the traditional businesses that have stores where consumers make purchases in person — are looking for novel ways to push their online competitors out of the market. This push by big manufacturers and big corporations is upsetting a tech ecosystem that powers ecommerce.

As if to make our point for us: in Alcon Vision v. Lens.com we see first-hand how large, multinational corporations leverage their resources to control competition and limit sales of their market competitors. Alcon has engaged in anti-competitive tactics to push contact lens discounters out of the market by implementing a Unilateral Pricing Policy (UPP) which mandates a minimum retail price for certain lenses. For non-economists, a UPP is a type of price fixing that keeps the cost of a product artificially high.

Alcon wants to push Lens.com, the nation’s second-largest online seller of contact lenses, out of the market. All the legalese of the lawsuit is couched in the language of a trademark dispute, what is really at stake is that Alcon wants to prevent Lens.com from delivering to consumers what consumers want at a price they’re willing (and able) to pay.

For many consumers, shopping online offers more choices at better prices. Regardless, Alcon wants to bulldoze the discounters’ market for contact lenses. It wants to unravel the gray market for contact lenses. Again, for the non-policy geek, unlike a “black” market, a “gray” market is where the goods being traded are legal goods and buying and selling those goods is perfectly legal. A gray market is established to avoid a regulatory regime that only increases costs to consumers.

For consumers interested in contact lenses, they must obtain a prescription and then purchase their contact lenses from Eye Care Practitioners (ECPs). Or, consumers can go to discounter sites, like Lens.com or 1800Contacts.com. These discounters – the gray market – allow consumers a choice at a better price point. Without the gray market, patients would be compelled to purchase their lenses only from ECPs.

And adding insult to injury for consumers, the more patients forced to buy their Alcon lenses from an ECP as opposed to a discount retailer, ECPs would be more likely to prescribe Alcon lenses which means higher prices and more sales for Alcon.

Here’s a better idea: Let consumers purchase their lenses from online discounters. If it’s not broken, please don’t try to fix it.

Andrew Langer is President of the Institute for Regulatory Analysis and Engagement, a new organization dedicated to assessing the impact of regulation on American society. Robert Goldberg is vice president at the Center for Medicine in the Public Interest and co-host of the Patients Rising podcast.

 

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