A sympathetic Australian approach to life cycle management and recent CMA guidance on Pharma sector rebates


Our new CLIP of the month comes from one of the antitrust blogs recommended on our sidebar. A guest contributor on ‘Chillin Competition’ has blogged on a recent Australian judgment which eschews the EU/US trend towards infringement findings in cases concerning life cycle management strategies in the pharma sector.

In a ACCC v. Pfizer Australia, handed down earlier this year, Judge Flick of the Federal Court of Australia (FCA) held that Pfizer’s adoption in 2011 of a ‘direct-to-pharmacy’ (“D2P”) sales model, along with a rebate accrual scheme, for atorvastatin (Lipitor) in the period immediately preceding patent expiry did not contravene the applicable competition rules. Attentive readers will recall that Pfizer had introduced a D2P model a few years earlier in the UK, and successfully resisted an application for mandatory interim relief brought by a group of wholesalers including AAH and Phoenix. The fact that the OFT was already considering Pfizer’s new scheme weighed heavily in the English Court’s unwillingness to grant the relief sought (query whether this would still be the outcome if the case were heard today, given the renewed focus on private actions and the increasing willingness of the courts to grant mandatory interim relief, a topic to which we hope to return soon). Ultimately, the OFT determined in its Medicines Distribution market study report that it would, broadly “keep an eye” on things – and there have been no infringement findings on D2P or other forms of limited distribution, which have subsequently seen widespread adoption.

Indeed, just a few weeks ago, the CMA announced that it was closing an investigation into the distribution practices of an unnamed pharmaceutical company. This case also involved the grant of rebates, and the CMA has given guidance on its approach to this issue (although it is expressed in rather general terms, without any indication as to the features of the particular scheme which raised initial concerns).

Returning to the Australian Pfizer case, it is notable that the case was decided not on the merits of whether Pfizer’s conduct amounted to a breach of the rules, but rather on the basis that Pfizer did not have the requisite market power in the relevant period, due to imminent generic entry. This approach both accords with recent European Commission patent settlement decisions in Lundbeck and Servier (newly published this week) which find that generic companies represent a source of potential competition even before patent expiry for the purposes of Article 101, and contrasts with the approach to dominance in Servier, which takes no real account of such imminent entry. The FCA’s remarkably sympathetic approach to Pfizer’s life cycle management strategies (“There can be no doubt that Pfizer had to take some steps to combat the competition which it would confront when the atorvastatin patent expired in May 2012”) has – unsurprisingly – been appealed by the ACCC.