On 11 February 2013, the English High Court dismissed an application for an interim injunction in an abuse of dominance case concerning an alleged refusal to supply a patented HIV prescription medicine.
Chemistree Homecare Ltd (the "claimant") had applied for an interim injunction against Abbvie Ltd (the "defendant") concerning supplies of a patented medical product marketed under the brand name Kaletra®, a protease inhibitor used in combination therapies of antiretroviral ("ARV") medicines for HIV patients. The claimant is a pharmacy business, primarily involved in the supply of homecare services to NHS hospitals but also in dispensing medicines and delivering them to patients' homes and administering them to patients. It is also active as a medical wholesaler. The defendant supplies and distributes Kaletra® in the UK.
In 2005, the claimant was awarded a contract to provide pan-London HIV pharmacy home delivery services in cooperation with NHS hospitals. As a result, the claimant approached the defendant and opened an account for the supply of Kaletra®, expressly for the purpose of fulfilling its obligations under the contract. Use of Kaletra® steadily increased over time and, by 2012, faced with a shortage of supplies in the UK, the defendant requested information from the claimant regarding its NHS supply contracts and requirements for Kaletra®. After several exchanges, the claimant eventually revealed in January 2013 that less than 15% of its requirements for Kaletra® were to cover UK prescriptions related to its homecare services, and that over 38% actually represented demand for wholesale supply to cover prescriptions in Lithuania.
On learning about this, the defendant refused to supply the claimant with Kaletra® other than for the provision of homecare services. It still supplied quantities above those needed for the provision of homecare services, but considerably lower than what the claimant had ordered in December 2012. In response, the claimant, insisting that such an alleged refusal to supply was unlawful, began proceedings before the High Court, on the grounds that the defendant had abused its dominant position, in breach of Article 102 TFEU and the Chapter II prohibition of the UK Competition Act. The claimant also sought an injunction before the High Court requiring deliveries of 570 packs of Kaletra® per month until trial.
In its judgment, the High Court began by stating that, to establish a claim, the claimant must first prove that the defendant is in a dominant position and, second, that it was abusing that position. As this was an application for interim relief, the claimant had to show that there was a serious question to be tried on those two issues and that, in this respect, the claimant had a "real prospect of success", and that the grant (as opposed to a refusal) of an interim injunction carried the least risk of injustice between the parties.
On the issue of dominance, the High Court observed that the first step was to define the relevant market. Here, the primary question was that of demand substitution. Basing itself on past case law, the High Court stated that it was very possible for a single patented medicine to be dominant in a market and, that such a medicine could constitute a distinct market of it own, but this remained rare and was a question of fact. Here, the fact that there was no generic equivalent for Kaletra® did not mean that such a medicine constituted a distinct product market. The focus of the argument therefore revolved around the extent to which patients could be prescribed alternative medicines or switch to other products at the start or after they commenced their treatment.
The High Court considered that the evidence showed that it was inappropriate to switch a patient on a protease inhibitor such as Kaletra® to another kind of agent and that care had to be taken before switching any medicine. Yet, other evidence also indicated that switching within categories of protease inhibitors was a possible alternative. Further evidence suggested that switching should only take place when it was clinically appropriate. However, the claimant had failed, in the High Court's view, to provide evidence to indicate what share of total purchases of Kaletra® in the UK came into this category nor was there any evidence on the share of total purchases of Kaletra® in the UK accounted for by new or existing patients. Without at least some information, it therefore seemed impossible to argue that a small but significant increase in the price of Kaletra® would not cause a sufficient degree of switching to one of the other protease inhibitors, such that this increase would not be profitable for the defendant.
The High Court also noted that there was no question that those patients that depended on Kaletra® as a truly life saving therapy and for whom no suitable alternative existed, of being denied supplies of their medicine. The defendant had made it clear all along that it would continue to supply the claimant with its requirements for its UK homecare business. However, on the facts, there was no real prospect of the particular ritonavir based protease inhibitor that is Kaletra® constituting a relevant product market by itself. There was, therefore, no serious question to be tried on the issue of dominance and the application fell to be dismissed.
The High Court nonetheless decided to address the issue of abuse for completeness and reminded that the refusal to supply by a dominant undertaking may, but will not necessarily, constitute an abuse of that dominant position. Qualified or conditional refusal, as in the present case, may also be abusive. Accordingly, refusal by an undertaking to meet orders of an existing customer constitutes abuse where, without objective justification, that conduct is liable to eliminate a trading party as a competitor. Similarly, a dominant undertaking cannot discontinue supplies to a long-standing customer who abides by regular commercial practice if the orders placed by that customer are in no way out of the ordinary.
The High Court referred in this respect to the Lelos ruling (Joined Cases C-468/06 to C-478/06, Sot. Lelos v GlaxosmithKline [2008] ECR I-7139), holding that Article 102 TFEU has never obliged a supplier to adopt a particular manner of distribution of its own products. In Lelos, the dominant undertaking actively supplied wholesalers in Greece but restricted volumes of supplies in order to limit their parallel exports to other Member States. Here, the defendant's policy was not to supply wholesalers in the UK at all. According to the High Court, if an undertaking supplies a customer on the basis that the supply is for retail sale and has a policy of not supplying wholesalers, the fact that, unknown to the supplier, its customer is reselling some of those products on the wholesale market does not mean that the customer's orders for the purpose of wholesale constitute "ordinary orders" or mean that the undertaking cannot adhere to its policy and practice of not supplying wholesalers once it finds out what has been going on. It is not necessary to show that the customer has been deceitful. However, the High Court did consider that the claimant's conduct had been disingenuous and did not constitute "regular commercial practice" (i.e., orders out of the ordinary in terms of quantity). The fact that some or all of the claimant's wholesale requirements were for parallel export trade could not make the defendant's conduct abusive either. Therefore, on these grounds, the High Court concluded there was, on the facts, no real prospect that the claimant could succeed in showing that if the defendant was in a dominant position, its conduct was abusive.
For all the above reasons, the High Court dismissed the application for interim relief.
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.
