## Facts

- A group of California retail pharmacies purchased prescription drugs for resale through a distribution chain involving manufacturers and wholesalers.
- The pharmacies alleged several brand-name drug manufacturers conspired to maintain supracompetitive prices, including by restricting importation of lower-priced Canadian drugs.
- The alleged cartel overcharge was paid initially by pharmacies as direct purchasers (often from wholesalers, sometimes from manufacturers).
- The pharmacies generally passed the higher acquisition costs to consumers by raising retail prices.
- The pharmacies sued for antitrust violations under the Cartwright Act and sought relief under the Unfair Competition Law (UCL), including restitution and injunctive relief.
- Defendants argued the pharmacies suffered no recoverable harm because any overcharge was passed on to consumers.

## Issues

1. Whether defendants may assert a “pass-on” defense under the Cartwright Act to defeat or reduce a direct purchaser’s damages claim based on downstream pass-through.
2. Whether pharmacies that paid an alleged overcharge but passed it on to consumers have standing under the UCL’s “lost money or property” requirement.
3. Whether, under the UCL, injunctive relief and/or restitution may be awarded when the direct purchaser passed on the overcharge.

## Decision

- The court reversed summary judgment for defendants and remanded.
- The court held that a pass-on defense is generally not available under the Cartwright Act.
- The court held direct purchasers may sue for the full overcharge even if they passed it on, subject to limits to prevent duplicative recovery.
- The court held the pharmacies had UCL standing because paying an alleged overcharge constitutes loss of money or property, even if later recouped through higher retail prices.
- The court held UCL injunctive relief is available independently of restitution; restitution may be constrained where the plaintiff passed on the overcharge.

## Legal Principles

- Under the Cartwright Act, antitrust defendants generally may not avoid liability by arguing the plaintiff direct purchaser passed on illegal overcharges to others.
- California permits suits by both direct and indirect purchasers; courts may use equitable and procedural tools to prevent double recovery, including limited consideration of pass-through for anti-duplication purposes.
- For UCL standing, a plaintiff satisfies the “lost money or property” requirement by paying more than it otherwise would have due to the challenged conduct; absence of net loss does not negate standing.
- The UCL authorizes injunctive relief and restitution (not damages); a court may issue an injunction even if restitution to the plaintiff is unavailable or inappropriate due to pass-through.

## Conclusion

The court rejected a general pass-on defense under the Cartwright Act and held that paying an alleged overcharge confers UCL standing even when the cost is passed to consumers; UCL injunctive relief remains available, while restitution may be limited to avoid awarding the passed-on overcharge to the direct purchaser.


Clayworth v. Pfizer, Inc., 49 Cal. 4th 758 (Cal. 2010)