context: Hefty anti-monopoly fines in the pharma industry have mostly been issued for APIs until now. But this new move shows the state will not cease to curb anti-competitive practices that jack up drug prices, no matter whether in production, as in the case of API drugs, or in distribution.
Yangtze River Pharmaceutical Group has been fined C¥764 million, three percent of its annual sales in 2018, for violating Anti-Monopoly Law, announced SAMR (State Administration for Market Regulation) on 15 Apr 2021, reports 21st Century Business Herald. Not only is this the first case of anti-monopoly legal action against finished drug products or Traditional Chinese Medicine, but it is also the highest fine issued to a single corporation for vertical monopoly or resale price maintenance.
The group sells over 300 drugs and had been making binding monopoly agreements with its downstream distributors to strictly control the price of each drug from 2015 to 2019. To keep prices high, distributors offering low prices were punished and third-party agencies were hired to monitor drug prices online. As one of the leading pharma enterprises with considerable market dominance, its distributors have limited negotiating power. Increasing sale prices can also serve to set the bidding prices high in centralised procurement, a common practice in the industry, says Liu Xu 刘旭 Tsinghua University National Strategy Institution researcher.
Fines for monopoly in the pharma industry have become increasingly higher but this case is especially significant as it shows anti-monopoly regulatory actions are moving beyond APIs (active pharmaceutical ingredients) towards finished drug products. Liu thinks monopolistic behaviours will not stop unless profits obtained through such actions are confiscated, making fines higher than profits.
Drug prices are central to people’s livelihood and reducing medical burdens, and the enforcement of Anti-Monopoly Law will continue to be strengthened to protect fair competition and consumer rights, says SAMR.