Four pharmaceutical companies conspired to monopolize the market and were fined heavily.

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In July, 2023, polymyxin B sulfate for injection, an exclusive drug produced by a subsidiary of Shanghai Pharmaceutical Group, suddenly announced that it had dropped from 2,303 yuan/branch to 270 yuan/branch, with a drop of nearly 90%, which attracted the attention of the industry.

The reporter learned from official website, State Administration of Market Supervision, that the decision of administrative punishment on the case of abuse of market dominance by four companies, such as Shanghai Shangyao No.1 Biochemical Pharmaceutical Co., Ltd., was recently released. According to the decision, in July 2023, the Shanghai Municipal Market Supervision Administration initiated an investigation into the abuse of market dominance by four companies, including SAIC Biochemical. In December 2023, Shanghai Municipal Market Supervision Administration made an administrative punishment decision on this case according to law. The punishment decision shows that during the period from December 2017 to June 2023, four pharmaceutical companies abused the dominant position in the market of polymyxin B sulfate for injection in China, and implemented the behavior of selling preparations at unfairly high prices, which excluded and restricted market competition and harmed the interests of patients and social public interests.

Well-known anti-monopoly law experts pointed out in an interview that the above four companies were fined 1.219 billion yuan for violating the Anti-monopoly Law of the People’s Republic of China, which is the case with the largest amount of anti-monopoly punishment in the pharmaceutical field at present.

Monopolize the API market

Polymyxin B sulfate for injection plays an important role in the treatment of carbapenem-resistant gram-negative bacteria infection, which is highly dependent on hospitals and patients and difficult to be replaced by other drugs. Before 2017, no domestic company produced its raw materials and medicines and needed to import them from abroad.

According to the circular of the State Administration of Market Supervision, three private pharmaceutical companies, Wuhan Huihai Pharmaceutical Co., Ltd., Wuhan Kede Pharmaceutical Co., Ltd. and Hubei Minkang Pharmaceutical Co., Ltd., and the state-owned pharmaceutical company Shanghai Pharmaceutical Group Shangyao No.1 Biochemical Pharmaceutical Co., Ltd., abused the dominant position in the market of polymyxin B sulfate for injection in China and implemented the act of selling preparations at unfair high prices.

Wuhan Huihai, Wuhan Kede and Minkang Pharmaceutical (collectively referred to as Wuhan Huihai) have the same actual controlling shareholders, confused personnel and office locations, unified decision-making, division of labor and cooperation, jointly implemented the acts involved, and shared monopoly profits.

In order to introduce and control its raw materials, in 2010, Wuhan Huihai signed an agreement with Danish Yaseli Company to become the agent of Danish Yaseli China market. Since 2016, Wuhan Huihai has given the sales manager of Danish Yaseli China a benefit fee, asking him not to sell the API to other enterprises, thus controlling the supply of the whole API in China market.

On the other hand, Wuhan Huihai is busy looking for manufacturers. Because only the drug is qualified for production in China, it has not been put into production. Wuhan Huihaisui reached a cooperation intention with Shanghai Pharmaceutical Biochemical Co., Ltd. to supply raw materials to Shanghai Pharmaceutical Biochemical Co., Ltd., which was responsible for drug declaration and production, and granted exclusive distribution rights to its preparations, from which Shanghai Pharmaceutical Biochemical collected processing fees. Shanghai Pharmaceutical Biochemical applied for production qualification, and obtained the production approval from the Food and Drug Administration in 2017, becoming the only production enterprise in China.

According to the Shanghai Municipal Market Supervision Bureau, operators must first have APIs for R&D and production when entering the market, while Wuhan Huihai controls the supply of APIs in the China market, so it is difficult for other operators to obtain APIs. It is reported that this is the second time that Wuhan Huihai was punished by pharmaceutical antitrust in 2023. In May 2023, the State Administration of Market Supervision fined him 4,126,800 yuan. Wuhan Huihai Pharmaceutical Co., Ltd. was established in 2003 with a registered capital of 3 million yuan, and its legal representative is Li Meilin.

Conspire to earn excess profits

Shanghai Pharmaceutical Biochemical Co., Ltd. belongs to Shanghai Pharmaceutical Group, with total assets of 800 million yuan and registered capital of 225 million yuan.

When Wuhan Huihai signed a cooperation agreement with Shanghai Pharmaceutical Biochemical Co., Ltd., it was agreed that when bidding for preparations, the two sides would negotiate and communicate on matters such as bidding price and distributors, and jointly agree on bidding matters. According to the rules of drug sales, Shanghai Pharmaceuticals Biochemistry came forward to connect with the drug recruitment departments of all provinces in the country, made online quotations, and invoiced and sold them to circulation enterprises according to the instructions of Wuhan Huihai to obtain the sales income of preparations.

As the only operator who sells the drug, Shangyao Biochemical has the ability to influence and determine the key trading conditions such as sales price and sales quantity. The price of the drug was 2303 yuan/piece in Fujian province for the first time, and then it reached 2918 yuan/piece in Shanghai. Since then, the provinces have hung up their nets one after another, and the prices are mostly 2303 yuan/branch to 2918 yuan/branch. According to the instructions of Wuhan Huihai, Shanghai Pharmaceutical Biochemical Co., Ltd. supplies the goods to the circulation enterprises after deducting the distribution fee according to the hanging price.

In 2016, the state began to implement the "two-vote system" policy, that is, drugs are invoiced once from the production enterprise to the circulation enterprise and once from the circulation enterprise to the medical institution, with the aim of reducing the circulation of drugs and lowering the price of drugs. Limited by the "two-vote system", Wuhan Huihai can’t directly obtain the monopoly profit of preparation sales by buying low and selling high. To this end, Wuhan Huihai, with the cooperation of Shanghai Pharmaceutical Biochemical Co., Ltd., obtained monopoly profits from the raw materials link by inflating the sales price of raw materials.

Due to the large amount of payment for raw materials, Wuhan Huihai arranged for 38 pharmaceutical companies in Hubei and Jiangxi to increase prices step by step, and gradually pushed up the import price of raw materials purchased from Danish Yaseli Company from 73 yuan/g to 94 yuan/g to 18,000 yuan/g to 35,000 yuan/g, and sold them to Shanghai Pharmaceutical Biochemical Company to produce preparations, from which profits were made. This creates the illusion that the high drug price is due to the high drug price of raw materials.

Drive up drug prices for nearly six consecutive years.

According to the Shanghai Municipal Market Supervision Bureau, in 2022 alone, the illegal income of Wuhan Huihai was 610 million yuan, and that of Shanghai Pharmaceutical was 330 million yuan. The biochemical behavior of Wuhan Huihai and Shanghai Pharmaceutical Co., Ltd. constitutes the abuse of market dominance to sell goods at unfairly high prices.

It is reported that the cost of drug production is mainly composed of two parts: the cost of raw materials and the cost of biochemical workshop. According to the biochemical financial data of Shanghai Pharmaceutical Co., Ltd., the total production cost of this drug is about 8.6 yuan -14.6 yuan/piece, and the processing fee charged by Shanghai Pharmaceutical Co., Ltd. is from 140.4 yuan/piece -230 yuan/piece. Finally, the net price of the drug is as high as 2303 yuan/piece -2918 yuan/piece.

In addition, the domestic sales price of polymyxin B sulfate for injection is significantly higher than that of other countries and regions in the same period, which is about 35 to 44 times that of overseas products.

"The serious handling of this case corrected the illegal behavior in time, and the drug price dropped by nearly 90%. This safeguards the interests of consumers and the public interest. " In an interview, Wang Xianlin, a member of the Expert Advisory Group of the State Council Anti-monopoly Committee and vice president of china law society Economic Law Research Association, pointed out that the parties in this case abused their dominant market position to sell drugs at unfairly high prices. On the one hand, they distorted the market price formation mechanism of this drug and made its price seriously deviate from the normal level, which excluded and restricted market competition. On the other hand, it also makes patients have to pay higher prices, increases the cost of medication for patients, and seriously damages the interests of patients; It also increased the expenditure of the national medical insurance fund, which seriously damaged the public interest.

The reporter learned that after the above-mentioned case was investigated in July 2023, six senior executives of Shanghai Pharmaceutical Group were investigated. In September 2023, Pan Deqing, former vice president of Shanghai Pharmaceutical, Li Ping, general manager of Shanghai Shangke Pharmaceutical, Chen Binhua, former general manager of Shanghai Pharmaceutical Biochemical, and Huang Yuhui, former deputy general manager of Shanghai Pharmaceutical Biochemical, were investigated. In November, Zhou Jun, chairman of Shanghai Pharmaceutical, and Gu Haoliang, former vice president of Shanghai Pharmaceutical, were investigated.