The reason why API is easy to form monopoly lies in the API approval system and the characteristics of API production. The production link of API is highly centralized, and the distribution channel of API is easy to be controlled.
In the pharmaceutical industry, there has always been a phenomenon that relevant enterprises use the market monopoly position to manipulate prices for huge profits, or attach unreasonable trading conditions for unfair competition.
Recently, the official website of the State Administration of market supervision reported that Shangqiu Xinxianfeng Pharmaceutical Co., Ltd. (hereinafter referred to as "Shangqiu Xinxianfeng") was fined about 11.0484 million yuan for abusing its dominant market position and selling phenol API at an unfair high price. According to the reporter, the phenol API is mainly used to produce salicylic acid phenol paste, commonly known as cornpaste. During the new pioneer monopoly period in Shangqiu, the average sales price of phenol API once increased by 9.2 times compared with the historical price.
Since this year, there have been frequent antitrust cases of APIs in the pharmaceutical field. According to incomplete statistics, as of September 2021, of the 18 publicly available investigation cases in the pharmaceutical industry, 13 were drug substance monopoly cases (1 suspended investigation), 5 were finished drug monopoly cases (including 1 involving both drug substance and patent medicine), and 1 was medical device monopoly case. In addition, there was another judicial case of API monopoly.
From the disclosed antitrust cases, compared with the past, this year's antitrust law enforcement for the pharmaceutical industry is stronger, broader and more accurate, which really reflects the characteristics of "stability, accuracy and ruthlessness".
In this context, why is the API monopoly still banned repeatedly? Some insiders said that the reason why API is easy to form a monopoly lies in the API approval system and the characteristics of API production. The production link of API is highly centralized, and the distribution channel of API is easy to be controlled. In a highly concentrated market, operators naturally tend to implement monopoly behavior and obtain high monopoly profits. Therefore, the field of API has become the focus of anti-monopoly law enforcement in the pharmaceutical industry.
The pharmaceutical industry frequently issues antitrust fines
This year, the pharmaceutical industry has issued a number of antitrust fines.
On January 29, the State Administration of Market Supervision issued the first anti-monopoly order for pharmaceutical enterprises in 2021, and Xiansheng pharmaceutical was fined 100 million yuan. According to the decision on administrative punishment, Xiansheng pharmaceutical abused its dominant position in the sales market of batroxobin concentrated API (hereinafter referred to as batroxobin API) in China, refused to trade with the trading counterpart without justified reasons, excluded market competition and harmed the interests of consumers;
On April 15, the State Administration of market supervision also announced that Yangzi River Pharmaceutical Group Co., Ltd. was fined 3% of its sales in 2018, totaling 764 million yuan, for the implementation of the monopoly agreement in violation of the anti-monopoly law, which has become the highest anti-monopoly ticket issued in the pharmaceutical field since the implementation of the anti-monopoly law.
Shortly after that, on April 27, TIANYAO, an old pharmaceutical company in Tianjin, also received an antitrust ticket. Tianjin municipal market supervision and Administration Commission believes that TIANYAO shares divided the sales market of fluoxetine acetate API in the form of agreement, changed and fixed the price of fluoxetine acetate API, excluded and limited the competition in the sales field of fluoxetine acetate API, and violated the anti-monopoly law of the people's Republic of China. Therefore, Tianjin market supervision and Administration Commission decided to confiscate the illegal income of TIANYAO shares of more than 8.89 million yuan and impose a fine of more than 35.12 million yuan at 4% of the sales in 2019. The above fines and confiscations amounted to more than 44.02 million yuan.
On July 16, the State Administration of market supervision again issued the decision on administrative punishment for the monopoly agreement CP camphor (i.e. camphor according to the standard of Chinese Pharmacopoeia, hereinafter referred to as CP camphor) reached and implemented by Wuzhou Huangpu Chemical Pharmaceutical Co., Ltd., Suzhou Youhe Technology Co., Ltd. and Jiangsu Jiafu Pharmaceutical Co., Ltd. According to the information of Jiangsu market supervision bureau, the administrative punishment decision: Wuzhou Huangpu Chemical Pharmaceutical Co., Ltd. was fined and confiscated 8.77 million yuan; Suzhou Youhe Technology Co., Ltd., fined and confiscated 4.12 million yuan; Jiangsu Jiafu Pharmaceutical Co., Ltd. fined and confiscated 3.99 million yuan. The above three enterprises fined and confiscated a total of 16.88 million yuan.
Dr. Sun Jin, Professor of Law School of Wuhan University and director of competition law and Policy Research Center, said in an interview with reporters that a basic requirement of anti-monopoly law enforcement is fair and impartial law enforcement. Fair and impartial supervision and law enforcement is very conducive to promoting fair competition in the market. As long as they violate China's anti-monopoly laws and regulations, both domestic enterprises and multinational enterprises will be punished and bear corresponding responsibilities.
In the case of frequent anti-monopoly fines, some public opinion said that 2021 was the first year of China's anti-monopoly. Professor Sun Jin said that this statement was not accurate, "The frequent exposure of antitrust cases only shows that there is a certain rationality in the antitrust law enforcement of digital platforms. However, in recent years, the state has made important decisions and arrangements to strengthen antitrust, which fully shows the importance and urgency of strengthening the supervision of antitrust law enforcement." Sun Jinjiao said.
Why does API become the focus of pharmaceutical antitrust
API refers to the API used for the production of various preparations. It is located in the upstream of the pharmaceutical industry chain and is the basis for ensuring the production of downstream preparations and meeting the needs of clinical medication. For a long time, China has been the second largest API producer and the largest API exporter. The export of API is close to 20% of the world API market share, and the products are exported to more than 160 countries and regions.
In January 2017, the price supervision, inspection and antitrust bureau of the national development and Reform Commission revealed in a seminar that there are 1500 kinds of APIs for finished drugs in China, of which only one enterprise of 50 APIs has obtained the approval qualification to produce, only two enterprises of 44 APIs and only three enterprises of 40 APIs can produce. 10% of APIs can only be produced by single digit manufacturers The production of API is in the hands of a very small number of production enterprises.
Professor Sun Jin told reporters that among the monopoly problems in the pharmaceutical field, API has a high or even 100% market dominant position in the relevant commodity market, regional market and time market, that is, API is irreplaceable in a certain time and space, and API monopoly behavior, especially unfair high price behavior, has become the main cause of monopoly in the pharmaceutical field The "culprit" is actually "source monopoly". Therefore, API is bound to become the focus of national pharmaceutical antitrust.
Taking the monopoly case of Xiansheng pharmaceutical industry as an example, batroxobin preparation is the basic drug and special specific drug for the treatment of sudden deafness. Batroxobin API is the only API for the production of batroxobin preparation, and its components can not be replaced by any other API; on the other hand, there are strict control measures in China's API market, and the production of API requires the qualification approval of administrative organs, and foreign raw materials China also needs import approval documents for drug import. Therefore, the market in this case is defined as the sales market of batroxobin API in China.
Lin Wei, managing partner of Beijing Daxiao law firm, also said at an industry forum on the topic of "anti-monopoly and law enforcement of API in China". In general, administrative law enforcement agencies usually judge whether API enterprises meet the monopoly situation from the following two aspects:
First, the market dominant position should be presumed according to the market share. API enterprises often have a high market share, so they are recognized as having a market dominant position. According to relevant reports, only a few enterprises can produce 10% of China's API, and the number of pharmaceutical factories actually produced may be less. Operators in the oligopoly market often have a large market share, which is not easy to tolerate It is easy to be presumed by the anti-monopoly law enforcement agency to have a dominant market position according to Article 19 of the anti-monopoly law.
Second, it is difficult for downstream pharmaceutical enterprises to form a buyer's force, which strengthens the market dominance of API enterprises. In the API market, downstream pharmaceutical enterprises are generally difficult to form a force sufficient to compete with upstream API suppliers. According to the sample survey results of API to preparation manufacturers, one API corresponds to 169 preparation enterprises at most The dominance of the finished drug market and the absolute weak position of downstream pharmaceutical enterprises.
"Article 17 of the anti-monopoly law stipulates the abuse of market dominant position. Combined with the eight cases of abuse of market dominant position in the API sector, the abuse of market dominant position in the API sector mainly has four forms: unfair high price, refusal to trade, tie-in sale and attaching unreasonable conditions." Lin Wei said that in addition, due to the high entry threshold of relevant markets, it is difficult for other operators to enter relevant markets at a reasonable cost in the short term, and the lack of potential competitors also makes the existing operators in the market unable to be effectively constrained by competition. This also makes the monopoly treatment of API need to be implemented in five directions: reducing market entry barriers and improving judicial remedies Increase the illegal cost; innovate the way of law enforcement; strengthen industry self-discipline.
Antitrust law enforcement will become the norm
In fact, in recent years, the market regulatory authorities have kept the sharp sword of antitrust hanging high, constantly took the initiative, performed their duties according to law, strengthened law enforcement, severely investigated and dealt with a number of monopoly behaviors of API, such as chlorpheniramine, glacial acetic acid, calcium gluconate and other monopoly cases, effectively curbed the frequent trend of monopoly behaviors in the field of API, and effectively maintained the competitive order of API market.
As early as 2019, the general office of the State Council issued the opinions on further ensuring the supply and price of drugs in shortage, emphasizing "strengthening the law enforcement of illegal acts such as API monopoly" and "investigating and dealing with monopolies and price violations in the field of API and preparation according to the strictest standards, and adhering to investigating and dealing with them severely and quickly".
In 2020, the State Administration of market supervision and Administration promulgated the antitrust guidelines in the field of APIs (Draft for comments). In February this year, the China office and the State Office issued the action plan for building a high standard market system In addition, the Standing Committee of the National People's Congress has listed the revision of the anti-monopoly law as a key legislative matter this year, which will provide high-quality institutional supply for increasing the anti-monopoly law enforcement in the field of APIs. At present, the draft amendment to the anti-monopoly law has been submitted to the 31st meeting of the Standing Committee of the 13th National People's Congress for initial review on October 19 Discussion.
On May 12, the State Administration of market supervision further upgraded its anti-monopoly, and a very rare notice was posted: the punishment of foreign anti-monopoly institutions against foreign pharmaceutical enterprises was issued by the competition and market authority, the UK's anti-monopoly law enforcement agency. Two days before the release of the notice (May 10) , the British antitrust Department announced that three multinational pharmaceutical companies, GlaxoSmithKline, Merck and Yalai, had violated the competition law, and the British competition appeals court had rejected the appeals of the three pharmaceutical companies.
This once triggered industry forecasts, which means that China's antitrust will also target multinational pharmaceutical enterprises in the future. In the above notice, the content related to the "reverse payment agreement" has also become the focus of the industry.
"One of the basic requirements of anti-monopoly law enforcement is fair and impartial law enforcement. Fair and impartial supervision and law enforcement is very conducive to promoting fair competition in the market. As long as China's anti-monopoly laws and regulations are violated, both domestic enterprises and multinational enterprises will be punished and bear corresponding responsibilities," Professor Sun Jin told reporters.
In this regard, Sun Jin also introduced that the reverse payment came from a case decided by the U.S. Supreme Court in 2013 [Federal Trade Commission v. Actavis, Inc. (2013 WL 2922122)]. "Generally speaking, in a dispute settlement agreement, the defendant usually needs to pay a certain amount of compensation to the plaintiff in exchange for peace. However, in the 'reverse compensation settlement agreement', the plaintiff bringing the lawsuit pays compensation to the defendant. Because the reverse payment has the function of restricting and excluding market competition, it may infringe on the rights and interests of consumers to enjoy cheap drugs, so it should be punished To the attention of antitrust law enforcement. "
Professor Sun Jin stressed that in order to build a high standard market system, promote factor market-oriented reform, achieve high-quality economic development, better adapt to and promote the new development pattern of double cycle, the decision-making level and the whole society have an "economic constitution" in the anti-monopoly law There will be more and more consensus on the status of the market. There will be considerable progress in anti-monopoly law enforcement and full implementation. The Legislative Council of the anti-monopoly law will be more sound, law enforcement will become the norm, and will play a more important role in maintaining the order of fair competition in the market and protecting the interests of consumers.
