In brief The Federal Court of Australia has recently dismissed the ACCC’s case against pharmaceutical company Pfizer. The ACCC alleged that Pfizer had misused its market power and engaged in prohibited anti-competitive exclusive dealing.1 The Court found that the actions taken by Pfizer leading up to the expiry of its atorvastatin patent were not done for an anti-competitive purpose, but rather in recognition of the commercial challenges that Pfizer would face as it moved beyond the expiry of its patent. Pfizer sought to remain competitive in the market. The decision is important for the pharmaceutical industry for several reasons.
- First, it is the first Australian decision to consider what strategies pharmaceutical patent holders can legitimately employ from a competition law perspective in the lead up to patent expiry.
- Secondly, the decision provides valuable commercial insight into what constitutes permissible competitive conduct in the pharmaceutical industry, by recognising that:
- the ‘substantial’ nature of a patent holder’s market power can shift in the period prior to, and shortly after, patent expiry (particularly, in instances where the patent holder has not had significant prior experience in the generic market), and
- pharmaceutical patent holders and generic manufacturers may engage in different positioning strategies in preparation for patent expiry.
The decision may also add fuel to the debate surrounding draft recommendations of the Harper Review to amend section 46 of the Competition and Consumer Act 2010 (CCA). The Harper panel has recommended the introduction of an effects test which considers whether conduct would substantially lessen competition. This proposed reform has been criticised in a number of submissions and in the broader public debate. The ACCC’s loss in Pfizer, which turned largely on the inability of the ACCC to establish a proscribed purpose, may provide further fuel to the fire for those advocating for the Harper panel’s recommendations. That said, it would be overly simplistic to characterise the outcome in the Pfizer case as demonstrating a deficiency in the current structure of the law. The judgment emphasises that the application of competition law requires careful assessment of the competitive dynamics of the conduct and the market in which it is to be assessed. It is doubtful that a different result should have ensued on any properly framed law concerned with a misuse of market power. The ACCC has 21 days to appeal the Pfizer decision and according to ACCC Chairman Rod Sims ‘the ACCC will carefully consider the judgment’.2 Click here to read the full article. Authors