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Price of contact lenses at issue in court case

About 40 million Americans wear contact lenses to correct their vision -- and how much those lenses cost is now the subject of a courtroom battle. The largest lens manufacturers don’t want eye doctors who sell contacts to be undercut by discounters who are willing to charge less than the suggested minimum price. At stake is the $4 billion Americans spend on contact lenses each year. Hari Sreenivasan speaks with Lindsay Whitehurst of the Associated Press who is covering the story.

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  • HARI SREENIVASAN:

    About 40 million Americans wear contact lenses to correct their vision, and how much the lenses cost is now the subject of a courtroom battle.

    A recent federal appeals court ruling temporarily allows discounters like 1-800-CONTACTS to charge less than the largest lens manufacturers would prefer. The lens makers don't want eye doctors who sell contacts to be undercut by discounters who go below a suggested minimum price.

    At stake is $4 billion Americans spend on contact lenses.

    Yesterday, I spoke with Associated Press reporter Lindsay Whitehurst, who is covering the case.

    Four billion dollars is a big amount. Forty million Americans using contact lenses is something that we all sort of take for granted. What happened in this specific case?

  • LINDSAY WHITEHURST, Associated Press:

    So, in this case, the state of Utah actually passed a law that banned minimum prices for contact lenses, so told the manufacturers, you can no longer set minimum prices for your products.

    The manufacturers — and there are a few big manufacturers that really dominate this industry — had set some prices and told resellers that if you sell our contacts, our products at a price below this, we will yank our products; we won't sell to you anymore.

    And, in particular, this affected discount sellers, like Costco and 1-800-CONTACTS, which happens to be based in Utah.

  • HARI SREENIVASAN:

    So, when we say resellers, most people end up getting their prescription filled the optometrist. Unlike other health care providers, optometrists can actually sell you stuff too.

  • LINDSAY WHITEHURST:

    Right.

    And they make prescriptions that are brand- and product-specific. And unlike discount sellers, they can introduce patients to new products. So, they might say, hey, this product from Johnson & Johnson just came on the market; I think it would be great for you.

    A discount seller, just by the nature of their business, that's — that's now how — that's not what they do. They won't suggest new products to customers. So, the manufacturers, eye doctors are central to their business plan, because they actually bring in new customers.

    So, that's one reason why the manufacturers want to make sure those eye doctors aren't losing business.

  • HARI SREENIVASAN:

    So, the manufacturers and the eye doctors have to say, listen, 1-800-CONTACTS or Costco doesn't have the expertise that I do when I prescribe you something.

  • LINDSAY WHITEHURST:

    Right. Exactly.

    And, of course, there's something to that. You do want to have a trained professional who teaches you how to put them in your eyes. And there — it's certainly a medical thing. So, there's definitely something to that.

    But, of course, contacts — contacts can get kind of expensive, so customers are looking for ways to save a little money. And they're looking to places like 1-800-CONTACTS. They have actually managed to capture about 10 percent of this $4 billion market now.

  • HARI SREENIVASAN:

    OK. So, the manufacturers must be trying to appeal this, but, at this point, what is the state of play?

  • LINDSAY WHITEHURST:

    So, right now, a discounter like 1-800-CONTACTS, they have actually lowered some of those prices below those minimums set by the manufacturers.

    And so this law only applies in Utah, but because 1-800-CONTACTS is based here, they can sell anywhere in the country. Those transactions, if you are in New York or in Montana, and you buy contacts online from 1-800-CONTACTS, that's considered an in-state transaction, no matter where the customer is.

    And this is really central to the problem manufacturers are basing their appeal on. Or the argument they're basing their appeal on is, they're saying this violates interstate commerce rules.

    And, so far, this hasn't gained a lot of traction in the courts, but it's really kind of an interesting idea, an interesting concept in the age where people buy a lot of things online.

  • HARI SREENIVASAN:

    All right, Lindsay Whitehurst joining us from the Associated Press, thanks so much.

  • LINDSAY WHITEHURST:

    Thank you.

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