China fined two pharmaceutical companies a combined 321 million yuan ($45.4 million) for monopoly practices as the country’s only suppliers of ingredients for a drug that’s crucial in emergency medicine.
The State Administration for Market Regulation (SAMR) fined Hong Kong-traded Grand Pharmaceutical (China) Co. Ltd. 286 million yuan and Wuhan Huihai Medicine Co. Ltd., 35 million yuan, the market regulatory agency said Sunday in a statement.
The companies were the only domestic suppliers of ingredients for norepinephrine and epinephrine injections, which are used in the emergency treatment of allergic reactions and cardiopulmonary resuscitation to reverse cardiac arrest.
The two companies agreed verbally in 2016 for Wuhan Huihai to stop selling ingredients for norepinephrine and epinephrine injections, according to a punishment decision letter released by the regular. In exchange, Grand Pharmaceutical would sell the injections to Wuhan Huihai at below-market prices and then them buy back at high prices. Grand Pharmaceutical also asked other pharmaceutical companies to sell injections to Wuhan Huihai at below-market prices so that Wuhan Huihai could resell them at high prices, the letter said.
Under this arrangement, Grand Pharmaceutical acted as both an ingredient supplier and an injection seller. Using its monopoly power over the supply of ingredients, Grand Pharmaceutical asked other injection makers to sell the drugs to it at low prices and then resold them to hospitals at high prices. Grand Pharmaceutical also controlled the sales territory, pricing and quantities available to other drugmakers, the market regulator said.
Through these practices, Grand Pharmaceutical excluded and limited competition in the norepinephrine and epinephrine injections market, damaged legitimate interests of related pharmaceutical companies, and harmed the interests of patients and the public, the regulator said.
As a result, the prices of norepinephrine and epinephrine injections kept rising over the years and were included on the list of drugs in short supply in some regions, increasing costs for the national medical insurance program, the regulator said.
Earlier this year, leading Chinese drug-ingredients supplier Northeast Pharmaceutical Group. Co. Ltd. was fined $19 million for abusing its dominant market position in materials used to make a treatment for kidney dialysis patients.
Among the 1,500 active pharmaceutical ingredients produced in China, about 50 were produced by only one company, 44 by two companies, and 40 by three companies, according to publicly available industry information. Some drug-ingredient suppliers also make the final drugs themselves, further aggravating the high concentration of certain drugs.
China’s drug ingredient industry is characterized by a small number of approvals, high market barriers, strong demand rigidity, weak price elasticity and high market concentration, which combined motivate monopoly practices, wrote Meng Yanbei, a professor at the Law School of Renmin University of China, in an article. Meng focuses on competition and industrial law.
To prevent monopoly practices, regulators should consider starting from the source, facilitating market access, increasing the supply sources of key ingredients and enhancing the level of market competition, Meng said. (Source: caixinglobal.com)
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