ACCC takes Pfizer competition case to High Court
Appeals June 25, 2018 3:47 pm By Christine Caulfield | Melbourne

The Australian Competition and Consumer Commission is seeking special leave from the High Court to appeal a ruling in a case alleging drug giant Pfizer misused its market power ahead of the expiration of its patent for Lipitor.

The ACCC wants to challenge the Full Federal Court’s decision on May 25 that let stand a judgement in favor of Pfizer.

“The ACCC is seeking clarity from the High Court on how to assess anti-competitive purpose, an important issue raised by this case,” ACCC Commissioner Sarah Court said in a statement Monday.

“This case raises important issues about when a company with substantial market power can be found to have acted with a proscribed anti-competitive purpose.”

The Full Court agreed with the ACCC in finding that Pfizer had a substantial degree of market power in the sale of atorvastatin, the drug marketed as Lipitor, and that it took advantage of that power in early 2012 by bundling discounts with a minimum purchase of the drug.

But, in siding with Justice Geoffrey Flick, the Full Court ruled that the ACCC had not made out its case on appeal that Pfizer’s purpose was to substantially lessen competition.

“The primary judge was correct when he concluded that, at no time in the relevant period, did Pfizer have a proscribed purpose, either for the purposes of section 46(1)(c) of the Competition and Consumer Act or for the purposes of section 47(1) and section 47(10)(a) of the CCA, when it engaged in the impugned conduct relied upon by the ACCC in respect of each alleged contravention,” the court wrote.

The Full Court also ruled that Judge Flick had not erred in rejecting in its entirety the ACCC’s case under section 47, which prohibits exclusive dealing.

The competition watchdog said it was separately seeking special leave on the issue of when a “requirements contract” will amount to exclusive dealing for the purposes of section 47 of the Act.

Pfizer declined to comment Monday.

In its ruling, the Full Court emphasised that the ACCC “ran its case as a ‘purpose’ case, and not an ‘effects’ or ‘likely effects’ case.” The distinction is an important one, because recent amendments to the misuse of market power provision of the competition law do not require the regulator to prove purpose.

The ACCC said Monday while it took action against Pfizer in February 2014 using the pre-amendment section 46, the issue raised in the appeal relating to a proscribed anti-competitive purpose “remains relevant after the amendments to section 46”.

The regulator appealed had taken its case to the Full Court after Judge Flick found that the actions taken by Pfizer to protect its market share in the lead up to the May 18, 2012 expiration of the Lipitor patent did not constitute misuse of market power or exclusive dealing.

Lipitor was the world’s best-selling prescription drug at the time of the patent’s expiration.

The ACCC claims Pfizer engaged in anticompetitive conduct through its plan to bypass wholesalers and supply its prescription drugs directly to pharmacies; by establishing a scheme under which pharmacies could accrue rebates on purchases of certain drugs, including Lipitor; and by offering discounts and rebates conditional on the purchase of a minimum amount of its generic atorvastatin.

Pfizer’s offers to pharmacies were first made before the patent expired, when other generics producers were not allowed to make competing offers to pharmacies to supply generic atorvastatin.

Judge Flick found that while Pfizer had taken advantage of its market power, its market power was not “substantial” at the time of the alleged conduct because it was already facing strong competitive pressure from rival generics producers, including Ranbaxy, Apotex, Alphapharm and Sandoz.

The Full Court ruled last month that Judge Flick erred in finding that the market was not substantial.

“At all relevant times up to late 2011, Pfizer possessed substantial market power in the
atorvastatin market. Up to that point in time, it had long been the sole supplier of
atorvastatin in Australia,” the court said.

In his ruling, Judge Flick also found that although Pfizer’s actions made it harder for other generics to compete, the ACCC had failed to prove Pfizer engaged in the conduct with the purpose of preventing competitors from entering the market. Pfizer’s actions were undertaken “for the purpose of seeking to remain competitive in the market”, the court said.

The ACCC is represented by Webb Henderson. Pfizer is represented by Allens.

The case is Australian Competition and Consumer Commission v Pfizer Australia Pty Ltd.

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Christine Caulfield

Christine Caulfield has been a journalist for 18 years. She was most recently the Co-Managing Editor at US legal news publication Law360. Prior to that she worked as the County Court reporter for The Herald Sun. She is Co-Founder and Editor of Lawyerly.