Clayworth v. Pfizer, Inc.

A group of retail pharmacies operating in California (the pharmacies) (plaintiffs) purchased pharmaceuticals from manufacturers (the manufacturers) (defendants) that operated in the United States and Canada. In Canada, the manufacturers’ products were subject to pricing control. According to the pharmacies, the manufacturers worked in concert to keep prices artificially high in different ways, such as by restricting the importation of Canadian drugs. Pharmacies were not the ultimate purchaser of drugs, however—consumers were. Manufacturers sold most drugs to wholesalers, which sold them to pharmacies, which sold them to various groups of consumers. Evidence later established that the pharmacies passed on the artificially high costs charged by manufacturers to the ultimate consumers by charging higher prices to the consumers. The pharmacies sued the manufacturers for, among other things, violating the Cartwright Act, a California antitrust statute. The trial court granted the manufacturers’ motion for summary judgment. Specifically, the trial court held that the Cartwright Act recognized a pass-on defense. According to the trial court, because consumers, not the pharmacies, suffered the ultimate harm, the manufacturers were entitled to summary judgment. The intermediate appellate court affirmed. The pharmacies appealed, claiming that a pass-on defense was not available under the Cartwright Act.