SAN FRANCISCO - (Mealey's) Pharmacies have standing to
pursue unfair competition law (UCL) claims alleging that they paid higher
prices because of price fixing by pharmaceutical companies, even though they
passed the higher prices on to consumers, the California Supreme Court held July
12 (James Clayworth, et al. v. Pfizer, Inc., et al., No. S166435, Calif.
Sup.).
Proposition 64's addition of an "injury in fact" requirement
to the UCL, Business and Professions Code Section 17200, does not change this
outcome, the court reasoned. The voters
who enacted Prop 64 "clearly intended to restrict UCL standing, they just as
plainly preserved standing for those who had
had business dealings with a defendant and had lost money or property as a
result of the defendant's unfair business practices," the court held.
The argument that the pharmacies have not suffered a
compensable loss conflates questions of standing with questions of what
remedies might be available, the court held.
Several pharmacies sued pharmaceutical companies in the
Alameda County Superior Court, alleging that the companies violated the UCL and
the Cartwright Act, Business and Professions Code Sections 16720 and 16726, by
conspiring to fix prices in the U.S. market.
James Clayworth was the named plaintiff.
Discovery showed that the pharmacies passed on all of the
claimed overcharges to their customers.
The pharmaceutical companies were granted summary judgment on the
"pass-on defense." The pharmaceutical
companies are Pfizer Inc., Abbott Laboratories, Amgen Inc., Allergan Inc.,
AstraZeneca International, Boehringer Ingelheim Pharmaceuticals, Bristol-Myers
Squibb Co., Eli Lilly & Co., Hoffman-LaRoche Inc., Johnson & Johnson
Health Care Systems Inc., Merck & Co., Novartis Pharmaceuticals Corp., Pharmaceutical
Research and Manufacturers of America and Wyeth Pharmaceuticals. The pharmacies appealed.
On appeal, the First District Court of Appeal held that the
pharmacies could not be awarded monetary relief under the UCL because they did
not "have an ownership interest in whatever funds they paid as a result of any
overcharge." The pharmacies appealed to
the California Supreme Court, which agreed to hear the case.
The Supreme Court said that the pharmacies had business
dealings with the pharmaceutical companies and lost money in the form of
overcharges that constituted unfair business practices.
"That a party may ultimately be unable to prove a right to
damages (or, here, restitution) does not demonstrate that it lacks standing to
argue for its entitlement to them," the court held.
Having determined that the pharmacies have standing to
pursue their UCL claims, the court held that the pharmaceutical companies
failed to identify why the pharmacies could not obtain injunctive relief if
they were to prove that an unfair business practice had occurred.
The appellate court's determination that the pharmacies
cannot obtain injunctive relief because they lack standing is erroneous, the
court said. "To the extent the holding
rests on the conclusion that even if pharmacies had standing, they could not
seek injunctive relief unless they could also seek restitution, it is similarly
erroneous," the court said. Injunctive
relief and restitution are two wholly independent remedies, and the UCL does
not prevent injunctive relief when restitution would be improper, the court
concluded.
Additionally, the court held that pharmaceutical companies
cannot defend allegations of price fixing under the state's business and
professions code by arguing that the pharmacies "passed on" the higher prices
to consumers. "We conclude that under
the Cartwright Act, as under federal law, generally no pass-on defense is
permitted. While the text of the Cartwright
Act does not answer the question, the Legislature's actions in response to Illinois
Brick Co. v. Illinois ([1977] 431 U.S. 720) and related federal statutory
amendments reveal a clear legislative preference for the Hanover Shoe v.
United Shoe Mach. ([1968] 392 U.S. 481) rule," the court held.
For all of your legal news needs, please visit www.lexisnexis.com/mealeys.
For more information,
call editor Bryan Redding at 610-205-1124, or e-mail him at bryan.redding@lexisnexis.com.