The ACCC has commenced proceedings in the Federal Court against Pfizer Australia Pty Ltd (Pfizer) alleging that commercial offers made by Pfizer to pharmacies before the expiry of the patents for its blockbuster Liptor drug were anticompetitive. In making the offers the ACCC alleges that Pfizer breached prohibitions in the Competition and Consumer Act 2010 on the misuse of market power and exclusive dealing.
Competition between originator (or ‘branded’) and generic pharmaceutical companies has been an area of particular focus for US and European competition regulators since at least the European Pharmaceutical Sector Inquiry in 2008/09. Particular attention has been paid to:
Regulators are keen to ensure that these practices do not tilt the delicate balance between the incentives for innovation provided by pharmaceutical patents and the aggressive competition and discounting that invariably follows patent expiry and generic entry.
The ACCC’s action against Pfizer falls into the last of the categories described above but it is the first public foray by the ACCC into the complex issues surrounding pharmaceutical patents. For that reason alone, the case is likely to be watched closely by participants in all innovative industries.
Atorvastatin is a pharmaceutical used to lower blood cholesterol and was marketed in Australia by Pfizer as LIPITOR Atorvastatin (Lipitor). Pfizer’s related entity was the owner of the patent for atorvastatin, which expired on 18 May 2012. According to documents filed in the proceedings by the ACCC, under the terms of a settlement of a previous patent dispute, Pfizer had agreed a licence to allow one competitor to launch a generic atorvastatin product on 18 February 2012.
In the 2010-2013 financial years Lipitor was the highest selling prescription pharmaceutical in Australia, with over one million prescriptions and 10 million units sold in each year.
The ACCC alleges that Pfizer implemented a strategy (described in more detail below) to protect its market share in the face of impending generic competition comprising:
On or around 31 January 2011, Pfizer ceased supplying prescription pharmaceuticals to pharmacies through pharmaceutical wholesalers (the conventional distribution method for pharmaceutical companies) and commenced supplying directly to pharmacies.
On or around 31 January 2011, Pfizer established an accrual fund scheme under which:
Each pharmacy received monthly statements outlining the amount of credit in their accrual fund. However, prior to 16 January 2012, pharmacies were not told how they could redeem that credit, only that they would have an opportunity the access the Lipitor Rebate around the time of the expiry of the atorvastatin patent.
The ACCC alleges that, on 16 January 2012, Pfizer made offers to virtually all pharmacies in Australia that it would:
The Atorvastatin Pfizer Offers were categorised into different classes (Platinum, Gold or Silver or Alternate) and made on the condition that pharmacies:
Pharmacies were later told that they would receive a sliding percentage of the Lipitor Rebate if they accepted the offer prior to a series of later dates. From 24 August 2012, Pfizer told pharmacies that they would not release any of the Lipitor Rebate to pharmacies who accepted the offer after that date.
The ACCC’s concern seems to focus on the timing of a compelling commercial offer that, if accepted, would stock pharmacies’ shelves with Pfizer’s own generic atorvastatin arguably before competitor generic companies were able to supply their own atorvastatin product.
Both the complex factual background and the history of market power and exclusive dealing cases in Australia suggests that the ACCC is likely to face a difficult and protracted fight to prove its allegations. Regardless of the result, the proceedings should provide valuable guidance on how patent holders can legitimately seek to compete with new entrants on the expiry of their exclusive rights.
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