The High Court has refused an application for an interim injunction made by a number of pharmaceutical wholesalers, which was aimed at preventing Pfizer from terminating its supply agreements with them.

In April 2005, Pfizer announced that it was changing distribution arrangements for its prescription drugs for a new 'direct to pharmacy' supply model, under which prescription drugs would be supplied directly to pharmacies and dispensing doctors, through one or more logistics services providers as opposed to wholesalers. The rationale for the new supply model was said to enable Pfizer to maintain ownership and control of its prescription drugs up to point of sale to its customers.

In September 2006, Pfizer announced its contract with UniChem (a former Pfizer wholesaler now providing a logistics service for Pfizer), and wholesalers were put on notice that as of 5 March 2007 Pfizer would no longer supply them.

The wholesalers complained to the OFT that Pfizer's refusal to supply them is a breach of Article 82 EC Treaty/Chapter II Competition Act and asked the OFT to take interim measures pending the implementation of the new distribution arrangements. Under Section 35 of the Competition Act 1998, the OFT has the power to impose interim measures, if it has started an investigation and it is necessary for it to act as a matter of urgency to prevent serious irreparable damage to a particular person or category of persons.

Under Section 25 of the Competition Act, the OFT can start an investigation if there are reasonable grounds for suspecting an infringement of the EC or UK competition rules. The OFT confirmed that it was gathering further information and conducting interviews, but on 19 February 2007 the OFT case officer indicated in a conversation with the complainants' legal representative that it had not yet decided whether there were sufficient grounds for opening a formal investigation.

Once it became clear that the OFT would not be able to take an interim measures decision prior to the new distribution arrangement coming into force on 5 March 2007, the wholesalers lodged an application for interim measures with the High Court, requiring Pfizer to continue to supply them. Their main claim was that the new distribution arrangements would result in small pharmacists and dispensing doctors switching to UniChem for non-Pfizer products (as UniChem will be the only supplier able to provide a full line of products), which would cause them serious and irreparable damage.

Judgment

The High Court rejected the application for an interim injunction.

The Court criticised the delay in lodging the application which meant that the defendants did not have sufficient time to respond to the claimants’ substantial evidence and that the Court did not have time to digest fully the factual and legal issues which arise. If a party wishes to apply to the High Court, it should do so in good time, to enable the application to be fully dealt with before the date when the injunction is to take effect.

The Court went on to consider the balancing risks of injustice if the injunction is made or refused, which also led it to refuse the injunction. Although the Court was prepared to assume that the wholesalers had a seriously arguable case, it was concerned that the disruption and reputational damage likely to arise from an injunction for Pfizer and UniChem were real and not readily capable of compensation. The Court concluded that a refusal of an injunction was likely to involve the least risk of injustice.

Comment

The OFT and the High Court both have parallel jurisdiction in respect of interim measures in Competition Act cases, but there is no guidance in the law on the interaction between the two procedures. The judge, while accepting that the claimants were waiting for a decision from the OFT before lodging their application with the High Court, did not consider this course of action was appropriate. He concluded that the fact that the wholesalers chose to pursue their complaints with the OFT and to persist in doing so until the very last moment, does not provide a good argument for not bringing the matter before the High Court at a much earlier stage.

Meanwhile, the OFT continues to assess whether there are reasonable grounds for suspecting an infringement of the competition rules in this case which would justify a formal investigation. Its decision will be anticipated by the industry, as other pharmaceutical companies have indicated that they may be introducing similar supply models.