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WASHINGTON (Reuters) - Moves by three of the four major U.S. contact lens makers to set price floors for many of their products, preventing low-cost retailers from discounting the expensive devices, have drawn scrutiny from lawmakers.
The Senate Judiciary Committee's nine-member antitrust panel will meet on Wednesday to consider the decisions by Alcon, owned by Novartis AG; Bausch & Lomb, owned by Valeant Pharmaceuticals; and Johnson & Johnson to put in place minimum sale prices for some of their products.
The practice would have been illegal just a decade ago but became legal when the Supreme Court ruled in 2007 that manufacturers can set minimum sale prices in some situations.
Lawmakers will seek to determine whether these policies limit competition and lead to higher prices for consumers.
“More than 35 million Americans rely on contact lenses as an essential part of their daily lives, and these consumers deserve fair prices," Democratic Senator Amy Klobuchar, who heads the panel, said in a statement.
Alcon was first out of the gate, setting a minimum price for some contacts on June 1, 2013, a Novartis spokeswoman said in an email. Bausch & Lomb followed suit, and Johnson & Johnson is in the process of implementing a similar policy.
J&J is the top U.S. seller of contact lenses with 47.1 percent of the market, followed by Cooper Companies with 21.4 percent, Alcon at 20 percent and Bausch & Lomb at 9.8 percent, according to 2012 data from Euromonitor International, a market intelligence company.
Johnson & Johnson got rid of rebates and lowered some prices when it put its pricing policy into effect this summer, saying that the combination meant a price cut for many consumers.
Novartis said it implemented the policy to combat "showrooming" - the practice of having optometrists learn about their products then educating customers, only to have the patient go to an online discounter to buy the lenses for a lower price.
An estimated 10 percent of contact lenses were sold online, Euromonitor said in a blog post dated in December.
"The online channel is beginning to garner considerable attention from eyecare professionals. Many are seeing this channel as a threat to traditional stores," said Euromonitor. "The pricing strategies on the Internet usually mean a much cheaper price than that found in physical stores."
Two antitrust experts who looked at the industry said the motivation for the price floors may be to give optometrists an incentive to prescribe their lenses instead of rivals' lenses.
With prices set by the companies, contact lens wearers would buy from optometrists instead of discounters, the experts said.
Witnesses expected to testify include R. Joe Zeidner, general counsel at discounter 1-800 CONTACTS Inc.; Millicent Knight of Johnson & Johnson Vision Care; David Cockrell, president of the American Optometric Association; and George Slover, senior policy counsel of Consumers Union, the advocacy group which publishes Consumer Reports.
Reporting by Diane Bartz; Editing by Ros Krasny, Jonathan Oatis and Diane Craft