Pfizer Australia Pty Ltd is a manufacturer and distributor of the cholesterol drug atorvastatin, and until May 2012, had the exclusive right to supply the drug in Australia. Prior to the expiry of this right, Pfizer established strategies aimed at providing incentives to pharmacies to purchase stock from it. The Australian Competition and Consumer Commission ('the ACCC') brought proceedings against Pfizer alleging that these strategies were in contravention of the Competition and Consumer Act ('the Act'). This proceeding was dismissed and the ACCC appealed.
Atorvastatin, marketed as Lipitor, is a drug that reduces the production of cholesterol in humans. Warner-Lambert LLC owned the patent rights of this drug from 18 May 1987 to 18 May 2012. In 2000, Pfizer Inc. acquired Warner-Lambert and all of its subsidiary companies. Pfizer Australia Pty Ltd supplies the drug in Australia. It became the biggest-selling drug in the world, achieving significant financial success in Australia. From January 2012, Pfizer also began to supply its own generic atorvastatin in Australia under the trade name Atorvastatin Pfizer.
From the period between 2000 to 18 May 2012, Pfizer had the exclusive right to supply atorvastatin in Australia. Pfizer expected that there would be significant competition in the supply of atorvastatin in Australia immediately after the expiry of its atorvastatin patent. As a result of this, Pfizer adopted the following strategies:
- In January 2011, Pfizer began supplying stock directly to community pharmacies instead of through wholesalers;
- In January 2011, Pfizer set up a scheme that caused funds to accrue and rebates payable to each community pharmacy to which its products were supplied;
- In January 2012, Pfizer began making a bundled offer to the community pharmacies to which it supplied. This offer tied the rebates they received to the quantity of stock they purchased.
In 2014, the ACCC commenced a proceeding against Pfizer in the Federal Court of Australia, alleging that the company had contravened the Act by using its substantial market power for the 'proscribed purpose' of 'deterring or preventing' and 'substantially lessening' competition in the atorvastatin market. The ACCC also alleged that Pfizer had engaged in exclusive trading, in contravention of the Act, by requiring the community pharmacies to whom it supplied atorvastatin, to also purchase a specified amount of Lipitor.
On 25 February, the Federal Court dismissed this proceeding. Justice Flick held that Pfizer no longer had a substantial degree of market power by January 2012, nor did it take advantage of this alleged power. He held that Pfizer was only seeking to position itself to remain a viable supplier of atorvastatin beyond the expiration on its patent, rather than hinder or deter others from competing in the market.
On 18 March 2015, the ACCC appealed, including on the ground that the primary judge erred in finding that that Pfizer no longer enjoyed substantial market power from January 2012 nor did it take advantage of that power.
In a joint decision of the Full Court of the Federal Court, Justices Greenwood, Middleton and Foster rejected the finding by the primary judge that by January 2012, Pfizer no longer had a substantial degree of market power in the atorvastatin market. Instead, they held that throughout the whole of January and February 2012, Pfizer retained a substantial degree of market power. Pfizer also took advantage of that power in the distribution models it established.
While the ACCC succeeded on the above, the court held that Pfizer did not violate the Act because even though it took advantage of its substantial market power in the atorvastatin market, it did not do so with the relevant 'proscribed purpose' which was that of 'deterring or preventing a person from engaging in competitive conduct' and 'substantially lessening' competition in the atorvastatin market.
The court held that it was implausible to suggest that Pfizer's conduct was an attempt at persuading the competing pharmaceutical corporations to withdraw from the atorvastatin market, or at trying to making it impossible for them to enter and compete in that market. There was immediate and vigorous competition from the other corporations and Pfizer fully understood that this was inevitable.
The court also adopted judicial authority which state, among other things, that the law recognises that 'competition in a market may be deliberate and ruthless' and may result in 'one competitor injuring another by attracting sales …' The court also adopted the principle that 'the effect of conduct upon competition is not to be equated with its effect upon competitors…' The appeal was dismissed.