Many of the global challenges encountered by the life sciences sector in recent years have emerged in Australia. Consistent with the global outlook in 2015, the Australian life sciences sector is grappling with a period of adaptation, reform and uncertainty.

In particular, this period is marked by:

  • evolving business models;
  • a more competitive market (e.g., increased competition from generic manufacturers);
  • the expiration of high-value patents;
  • close scrutiny from competition regulators of the responses of originator manufacturers to the threat or entrance of generic competition; and
  • sector and wider healthcare reform (e.g., amendments to the Pharmaceutical Benefits Scheme price disclosure arrangements).

Such challenges have necessitated a long-term strategic approach to portfolio management, revenue growth and market expansion. deloitte’s 2015 Global life sciences outlook contends (at page 7) that ‘[f]our major trends will capture   the sector’s attention in 2015: searching for innovation and growth, changing regulatory and risk environment, preserving and building shareholder value and preparing for the “next wave”’ of opportunities in the sector.

These major trends will likely give rise to two main competition concerns in Australia, which we disscuss in our article.


With the expiration of numerous blockbuster patents in recent years (including Lipitor, zyprexa, Plavix and Seroquel), the “patent cliff” has arguably passed its steepest point. however, originator manufacturers will continue to sustain significant revenue losses as the procession of patent expiries continues in 2015 and beyond. In several jurisdictions, competition regulators have challenged the legality of commercial strategies and practices employed by patent holders to remain competitive after patent expiry.

Earlier this year, we published a life sciences update about the Federal court decision in ACCC v Pfizer, which upheld Pfizer’s strategic response to the threat of generic competition in respect of the atorvastatin market in Australia. Our previous update, sets out the key implications of the decision for life sciences sector clients. however,  the Australian Competition and Consumer Commission (ACCC) is appealing the decision. In particular, the Accc is seeking clarification from the Full court on the key issues of market power and anti- competitive purpose.

The ultimate resolution of this case will help demarcate the legal boundaries of legitimate competitive conduct when originator manufacturers respond to the threat of generic competition and therefore set an important precedent for  the life sciences sector in Australia. In the meantime, the Accc will continue to closely scrutinise the conduct of both originator and generic manufacturers.


Rising demand for generic products and significant revenue losses after patent expiry are forcing pharmaceutical companies to implement long-term strategies to diversify their revenue streams, preserve shareholder value and achieve growth. These pressures are driving consolidation in the life sciences sector and shifting the focus toward growth categories, pipeline products and innovative technologies and medicines.

Within the pharmaceutical segment, originator manufacturers are offsetting losses to generic competition by acquiring or expanding their own generic businesses by way of alliance/ joint venture or m&A. In addition, m&A activity between pharmaceutical companies and either biotech or medtech companies is expected to blur the lines between the three core segments of the life sciences sector. Recent examples in the Australian context include:

  • GlaxoSmithKline’s acquisition of novartis AG’s human vaccines business, which received informal merger clearance in Australia in January 2015. The acquisition significantly enhanced the breadth of GlaxoSmithKline’s vaccines portfolio and pipeline and strengthened its manufacturing network;
  • The merger of GlaxoSmithKline’s and novartis AG’s consumer healthcare businesses (forming a new joint venture company, GSK consumer healthcare), which received informal merger clearance in Australia in december 2014, subject to a section 87B undertaking accepted by the Accc. The joint venture combined significant capabilities and expertise in both over-the- counter and fast-moving-consumer-goods; and
  • Pfizer’s proposed acquisition of hospira Inc, which received informal merger clearance in Australia in August 2015. hospira Inc is the world’s leading provider of sterile injectable pharmaceuticals and infusion technologies and is a global leader in biosimilars (i.e., generic biopharmaceutical products). Both sterile injectable pharmaceuticals and biosimilars are large and growing categories, and the proposed acquisition represents a strategic, complementary combination of branded and generic sterile injectable pharmaceuticals. The Accc considered that the proposed acquisition was unlikely to substantially lessen competition in any relevant market.

M&A activity in Australia will give rise to competition concerns where a merger would have the effect, or be likely to have the effect, of substantially lessening competition in a market. merger parties are not legally required to notify the Accc and may complete a transaction without seeking any regulatory approval. however, the Accc may subsequently investigate a merger and, if necessary, take legal action. In Australia, merger parties can have a proposed transaction considered and assessed by:

  • either informal or formal merger clearance from the ACCC; or
  • applying to the Australian Competition Tribunal for merger authorisation.

The test for whether a merger or acquisition of assets will breach the merger provision contained in section 50 of the competition & consumer Act is whether the transaction    will likely substantially lessen competition in a relevant market. In essence will the acquirer post-merger face such insufficient constraint that it can “charge more or give less.” The application of this test requires an examination of the substitutes for the products and services of the relevant businesses and the constraints upon their competitive conduct.