Medika manufactures and supplies several types of sterile fluids used in hospitals. Medika also manufactures PD (peritoneal dialysis) products which is a treatment for chronic renal failure.

Medika has manufacturing plants in Western Australia, Queensland and Victoria. It supplies 100% of sterile fluids to private and public hospitals across Australia. There is limited prospect of import competition as the products are bulky and not easy to transport from overseas. Regulatory approvals are also needed if a new player wishes to enter the Australian pharmaceutical market. There are substantial cost savings to be had when manufacturers can produce higher volumes and a range of product lines.

Prior to 2020, Medika had been the only supplier of PD fluids in Australia. In 2020, PatientCare entered the market. PatientCare is a US company. PD fluids have a higher profit margin so import competition is possible. Since 2020, Medika has sold about 80% of PD fluids in Australia, with PatientCare selling the remaining 20%.

The State Health Departments each procure sterile and PD fluids for their public hospitals through a tender process. The most recent tender documentation sought bids for:

(i) Sterile fluids; and

(ii) PD fluids.

Medika prepared tender responses for all States, offering its products on the basis of an item-by-item price or offering to supply both sterile and PD fluids together at a significantly lower price. No explanation was given by Medika for the difference between the separate item-by-item price and the bundled price.

Medika won all of the tenders and entered into 5 year supply contracts at the bundled price with the State Health Authorities.

The ACCC has received complaints from the Health Minister in Tasmania, who has faced difficult questions in Parliament regarding why no contracts were awarded to PatientCare.

What action might the ACCC choose to take in this case? *** PROVIDE REFERENCES TO SECTIONS OF ACT/LAW***