Australia: Generic pharmaceuticals and competition law: the ACCC vs Pfizer proceedings

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:

  • patenting practices, regulatory or litigation strategies that may frustrate or delay generic entry;
  • the terms on which pharmaceutical patent disputes are settled between originator and generic companies – particularly where those settlements result in an agreement by the generic to defer entry in return for a payment by the originator company (often referred to as a "reverse payment" or a "pay for delay" settlement);
  • disparagement of generic pharmaceuticals by originator companies; and
  • patent expiry strategies implemented by originator companies to seek to defend their market position upon expiry of their patents.

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:

  • changes to their distribution arrangements:
  • commencing an "accrual fund scheme"; and
  • offering discounts to pharmacies that purchased a proportion of their forward requirements for atorvastatin in one shipment.

Pharmacy supply arrangements

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.

Accrual fund scheme

On or around 31 January 2011, Pfizer established an accrual fund scheme under which:

  • accrual accounts were established for each pharmacy; and
  • Pfizer credited each account with a 'rebate' equal to a percentage of the pharmacy's purchases of non-generic prescription pharmaceuticals, including Lipitor which received a rebate sum equal to 5% (the Lipitor Rebate).

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.

Discount offers

The ACCC alleges that, on 16 January 2012, Pfizer made offers to virtually all pharmacies in Australia that it would:

  • supply Atorvastatin Pfizer, a new generic atorvastatin;
  • provide access to Lipitor Rebates; and
  • give discounts in relation to the supply of Lipitor and Atorvastatin Pfizer (Atorvastatin Pfizer Offers).

The Atorvastatin Pfizer Offers were categorised into different classes (Platinum, Gold or Silver or Alternate) and made on the condition that pharmacies:

  • purchased 75% of their anticipated generic atorvastatin supply requirements for the following 12, 9 or 6 months (the longer the term, the higher the discount on Atorvastatin Pfizer and Lipitor);
  • nominated a conversion rate, being the percentage of sales of Lipitor they anticipated being converted to sales of generic atorvastatin (higher conversion rates meant higher discounts on Atorvastatin Pfizer and lower discounts on Lipitor);
  • accepted the entire volume of Atorvastatin Pfizer in one shipment before 30 April 2012; and
  • accepted the offer before 24 February 2012 in order to receive that pharmacy's Lipitor Rebate.

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Most awarded firm and Australian deal of the year
Australasian Legal Business Awards
Employer of Choice for Women
Equal Opportunity for Women
in the Workplace (EOWA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.