Pfizer plans to appeal a court ruling in Pakistan that has called its behavior “oppressive” and sided with a small group of investors who allege the drugmaker systematically drained the coffers of its local operations through artificially high prices for ingredients, according to a report on LiveMint.com.

The eight investors - two others died waiting for the verdict - are part of a dwindling group of shareholders who now own less than 0.5 percent in Pfizer Laboratories Ltd (PLL), which is the current version of Pfizer’s operations in Pakistan that has origins in a manufacturing facility opened in 1961, the site writes. Some of the shareholders, who have been fighting Pfizer in court, maintain their original holdings are investments their parents made in a company called Dumex, acquired by Pfizer in 1959.

At its core, the legal battle is fairly simple, LiveMint writes. The shareholders allege Pfizer deliberately contributed to poor results at its Pakistan operations, continuously diluting the value of the minority stakeholders’ shares in an attempt to get 100 percent control of the business for a lot less than its actual worth. You can read the court ruling here.

At issue is “transfer pricing,” a common system under which related but separate companies assign prices for goods or services transferred from one company to the other. Because these are negotiated prices, there can be a potential for one company, especially the parent or majority shareholder, to take advantage of a unit.

Governments and regulators in the developing world, including India and Pakistan, are leery of opaque transfer pricing mechanisms because they fear a foreign parent company could use such transactions to drain resources away from a local unit. That is precisely what happened with PLL, say the minority shareholders, who allege Pfizer sold raw materials at huge markups. They say because Pfizer took equity in return for the cash it pumped into the struggling operation, the drugmaker ended up with a growing share of PLL at the cost of minority investors whose equity fell over time.

According to a court ordered examination of PLL’s practices done by Ernst & Young, Pfizer exported drug raw materials to the Pakistani unit at prices that were, in some cases, up to 70 times those charged by alternative providers. For example, the court papers show, amlodepine besylate, the active ingredient in high-blood pressure medicine Norvasc, was sold at $30,000 per kg while alternative sources could have provided it for as little as $500 per kg.

Another example was of piroxicam, used in arthritis drug Feldene, which was allegedly imported by PLL at $8,750 per kg, compared with $125 per kg in the market. Another ingredient, doxycycline, found in antibiotic Vibramycin, was imported by PLL at $700 per kg though it could have been purchased for $60 per kg.

You can read a little more about the case in The Business Standard of India.