The State Administration for Market Regulation (SAMR) has imposed administrative penalties on Grand Pharmaceutical Group Limited (HKG: 0512) and WuHan Huihai Pharmaceuticals Co., Ltd. The two companies were found guilty of reaching and implementing a monopoly agreement and abusing their dominant market position in the sales of active pharmaceutical ingredients (APIs). Both firms have been ordered to cease and desist from such practices.
Financial Penalties and Confiscations
In relation to Grand Pharma, SAMR confiscated RMB 149 million (USD 21 million) of illegal gains and imposed a fine of RMB 136 million (USD 19.3 million). WuHan Huihai faced similar penalties of RMB 30.9248 million in confiscations and RMB 4.1268 million in fines. Grand Pharma has released a statement acknowledging the penalties, stating that it has cooperated with the market regulation bureau, accepted the punishment, and made the required rectifications.
Impact on Production and Operations
Grand Pharma has clarified that the penalties account for approximately 3.48% and 15.85% of the audited comprehensive operating income and the profit attributable to the shareholders of the company in the most recent fiscal year, respectively. The company asserts that the penalties have little impact on the group’s production and operations, and it has since terminated the relevant monopoly agreement, ensuring the legal and compliant supply of raw materials to the market.
Determination of Illegal Facts and Market Abuse
Grand Pharma’s subsidiary was found to have reached and implemented a monopoly agreement on the sale of noradrenaline and adrenaline APIs from June 2016 to July 2019, according to SAMR. This abuse of dominant market position violated the Anti-monopoly Law. The company’s actions pushed up the prices of noradrenaline injection and adrenaline hydrochloride injection, increasing patient medication costs and national medical insurance expenditures, and harming the interests of patients and social public interests.
Market Vulnerability to Monopoly in China’s API Industry
The API market in China is susceptible to monopoly due to a small number of approvals, high market barriers, strong demand rigidity, weak price elasticity, and high market concentration ratio. According to incomplete statistics, about 50 types of APIs in China can be manufactured by only one enterprise, and 10% of APIs can only be produced by single-digit enterprises. The specific correspondence between drugs and APIs means that different APIs may lead to differences in efficacy and side effects, and there is generally no substitutability between different types of APIs.
Regulatory Upgrade in the API Sector
The national Anti-monopoly Bureau was established on November 18, 2021, consolidating anti-monopoly law enforcement work previously undertaken by various ministries. The bureau released the Anti-Monopoly Guidelines for the Active Pharmaceutical Ingredients on the same day, signaling a regulatory upgrade in the API sector. SAMR has previously investigated and dealt with multiple monopoly cases involving APIs, demonstrating a commitment to ensuring fair competition in the industry.-Fineline Info & Tech
