Uncovering the dark side of monopoly in the pharmaceutical field, nearly 1.8 billion yuan in fines and confiscations! A report
Recently, the "Annual Report on China's Antitrust Enforcement" released by the State Administration for Market Regulation revealed a set of data: 27 cases of monopoly agreements and abuse of market dominance were investigated and dealt with nationwide in 2023, with a total fine of 2.163 billion yuan. Among them, 7 cases involved the pharmaceutical field, with a total fine of about 1.772 billion yuan, accounting for more than 80%.
The tickets were circulated, the prices were increased layer by layer... a corner of the shady operations was revealed.
The cases announced this time involved many companies, including Northeast Pharmaceutical, Tianjin Jinyao, Yuanda Pharmaceutical, Wuhan Huihai, Jiangxi Xiangyu, and Shanghai Pharmaceuticals Biochemical. Among them, the case of abuse of market dominance by four companies, including Shanghai Pharmaceuticals Biochemical, was fined more than 1.2 billion yuan. This case can also be called a "classic" - a company started with the monopoly of raw materials and eventually leveraged the huge profits of the entire drug production, purchase and sales chain.
Screenshot from China Antitrust Enforcement Annual Report
The polymyxin B sulfate API involved in the case is an essential raw material for the production of polymyxin B sulfate for injection. No Chinese company produces this API, so it can only be imported from abroad. Seeing the "business opportunity", Wuhan Huihai began to enter the polymyxin B sulfate for injection market.
In April 2010, Wuhan Huihai signed a "API Supply Agreement" with Yaseli of Denmark and became Yaseli's agent in the Chinese market. In November 2013, Yaseli of Denmark obtained the "Import Drug Registration Certificate" for APIs. Since 2016, Huihai has paid benefits to the head of Yaseli's sales in China, requiring him to use his power not to sell polymyxin B sulfate APIs to other companies.
According to an official investigation, since 2015, Denmark's Yacell has sold 98% of the total amount of polymyxin B sulfate APIs exported to China to Huihai or companies designated by Huihai; the remaining 2% was sold to medical device research and development companies and was not used to produce polymyxin B sulfate for injection. In other words, Huihai controls the supply of polymyxin B sulfate APIs in China.
In order to achieve the goal of selling polymyxin B sulfate for injection at a high price to obtain monopoly profits, Huihai, with the cooperation of Shanghai Pharma Biochemical, arranged 38 pharmaceutical distribution companies to circulate tickets and increase prices layer by layer in the sales of raw materials. The raw materials purchased from Denmark's Yaseli at 73-94 yuan/gram were gradually raised to 18,000-35,000 yuan/gram and sold to Shanghai Pharma Biochemical for the production of preparations.
According to third-party statistics, since 2017, in the United States, India and Russia markets, where sales volumes are close to those in China, the sales price of preparations of the same or similar specifications is RMB 47-183 per unit, while the price in the Chinese market is RMB 2,303-2,918 per unit, which is 12-62 times that price.
On July 31, 2023, the Shanghai Municipal Administration for Market Regulation opened an investigation into Shanghai Pharmaceuticals. Shortly before that, the listed price of polymyxin B sulfate for injection dropped sharply from 2,303 yuan per vial to 270 yuan per vial.
After that, the National Healthcare Security Administration again summoned Shanghai Pharma Biochemical for talks, and Shanghai Pharma Biochemical promised to further reduce the online price of polymyxin B sulfate injection from 270 yuan/vial to 123 yuan/vial, and to ensure a stable supply.
The anti-corruption storm in the pharmaceutical industry in 2023 has caused the entire pharmaceutical industry to experience a "scraping bone healing". Entering 2024, a series of official actions are reminding us that this storm is still going on.
On May 27, the National Health Commission and 14 other departments issued the "Key Points for Correcting Unhealthy Trends in the Field of Pharmaceutical Purchase and Sales and Medical Services in 2024". The document puts forward 15 specific requirements from five aspects: continuously standardizing the order of pharmaceutical production and circulation, concentrating on rectifying unhealthy trends and corruption around the people, resolutely rectifying industry chaos, effectively safeguarding the security of medical insurance funds, and deepening and consolidating the results of centralized rectification work. Among them, it is clearly mentioned that the focus should be on illegal acts that push up drug prices and disrupt the order of drug circulation.
Some of the items involved in the major false invoicing case in the pharmaceutical field. Photo courtesy of the Ulanhot Public Security Bureau
Just a few days ago, the Public Security Bureau of Ulanhot City, Xing'an League, Inner Mongolia Autonomous Region revealed that the bureau had successfully cracked a major case of false invoicing in the medical field and arrested 32 criminal suspects. The total price and tax of the case was as high as 5 billion yuan.
In addition, according to incomplete statistics from China News Service Health, as of June 18, at least more than 150 "key few" in the medical and health system have been investigated this year, covering the "top leaders" in local health, medical insurance, and drug supervision fields, as well as the management of hospitals, pharmaceutical companies, and universities.
With the official combined force, who will be the next to tremble in fear?
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