As the deal is reviewed by the Federal Trade Commission in the US, the New Zealand Commerce Commission has cleared the acquisition by Pfizer Inc. to acquire all of the shares in Hospira Inc. Unlike the recent approval by the European Commission, the New Zealand clearance comes with no divestment conditions. The decision highlights the Commerce Commission’s robust competitive analysis, even in the face of high levels of potential concentration. It also puts in the spotlight the role of Pharmac, New Zealand’s monopoly drug buying agency. How should its countervailing market power be treated in merger analysis?


The new zealand commerce Act prevents a person from acquiring shares or assets of a business if the acquisition would, or would be likely to, substantially lessen competition in a new zealand market. The commerce Act puts in place a voluntary clearance regime under which a person contemplating an acquisition can apply to the Commerce Commission for a clearance. Once cleared, the acquirer has twelve months to undertake the acquisition free from competition concerns.

The Commerce Commission must grant a clearance if it is satisfied that the acquisition would not, or would not be likely to, substantially lessen competition in any market. A formal application is filed and the Commerce Commission then undertakes a detailed investigation prior to reaching its decision.

Pfizer filed its application for clearance on 28 April 2015 with the Commerce Commission reaching its decision by 17 June 2015 (modestly outside the Commerce Commission’s 40 working day target for “straight forward” clearance applications).

The written reasons for the decision were recently published.


The Commerce Commission looked at competition issues in the supply of both biopharmaceuticals (in particular biosimilars) and pharmaceuticals.

In its application for clearance, Pfizer noted that there were no actual overlaps in existing biopharmaceuticals registered in new zealand. consistent with the european commission approach, Pfizer’s clearance application also analysed the extent of overlaps between pipeline biologic/biosimilar products that were at a sufficiently advanced stage that they should be considered competitors. Pfizer argued that no such overlaps existed.

With regard to pharmaceuticals, Pfizer noted that it has a broad product base encompassing both hospital drugs and consumer medication in a wide range of forms. In contrast, hospira is focussed on generic speciality injectable pharmaceuticals. Pfizer therefore argued that competitive overlaps in new zealand were very limited. more specifically, Pfizer identified ten molecules where the proposed  acquisition would result in actual or potential overlap.

With regard to market definition, Pfizer urged the Commerce Commission to focus on the key molecule active  in the medicine (for example heparin) although in the case  of some medicines submitted that a more narrow approach is appropriate, such as galenic form. The Commerce Commission had previously adopted an approach based on Anatomical Therapeutic classification Level 3 (albeit for different  pharmaceuticals).

Pfizer then considered each actual and potential overlap and argued one or more of the following:

  • An absence of close competition between the applicable products, often due to a lack of clinical substitutability.
  • The presence of actual or potential competitors. emphasis was given to the presence of global competitors and the relative ease in terms of obtaining new zealand registrations.
  • The countervailing market power of Pharmac as a “powerful constraint on the merged entity.”


The Commerce Commission was satisfied that the acquisition would not, or would not be likely to, substantially lessen competition in any market. For pharmaceuticals, the commission considered that the most appropriate way in which to define the markets was to begin at the molecular level, but to further differentiate markets on the basis of  route of administration and galenic form to reflect the granularity of Pharmac’s demand.

In these markets, the commission found that Pfizer and hospira were not particularly close competitors for the  supply of the overlapping small molecule drugs, and that sufficient competition would remain in the markets with the merger. The countervailing market power of Pharmac was also relevant. The commission noted that generally “three   to  two”  mergers  were  likely  to  be  of  concern.  however, this concern was lessened in the situation where the  market included a large and sophisticated purchaser, which could choose the competitive strategy most effective for a given situation. The commission also viewed Pharmac as in a  strong position to solicit an alternative supply in the relevant markets (although because of the existing competition, it  was not necessary for the commission to further consider market entry). In relation to biosimilars, the  commission found that while Pfizer and hospira have new biosimilar drugs in development, there are a number of other pharmaceutical companies developing the same drugs which are likely to compete vigorously with the merged entity.

We note the Australian competition and consumer  commission is currently considering Pfizer’s proposed acquisition of hospira Inc, in the Australian market. See   Simon Uthmeyer and matthew Taylor’s Major trends give rise to competition concerns in the Australian life sciences sector article for further information.


For those considering mergers in this space, the following are some key lessons from the hospira acquisition for preparing clearance applications and engaging with the Commerce Commission:

  • Market definition will be very fact specific and a detailed analysis of the applicable pharmaceuticals will be required. A molecule based approach further differentiated by galenic form is likely to be the appropriate starting point, but a case-by-case analysis is still required.
  • The extent of “close competition” between the acquirers’ and the targets’ products is critical and detailed analysis is required.
  • Even high levels of existing concentration will not deter the Commerce Commission where there is evidence of likely potential competition from meaningful competitors.
  • The countervailing market power of Pharmac will be an important factor in merger analysis, particularly the extent to which Pharmac can choose competitive strategies and facilitate market entry.