The fine of 3 billion, nearly 10 years, why GlaxoSmithKline?

Recently, the State Food and Drug Administration issued an announcement
on the suspension of the import, sale and use of GlaxoSmithKline (GSK) dutasteride softgels.

On the same day, the Joint Procurement Office of the Chinese National Organization for Drugs issued an announcement deciding to cancel the qualification of GlaxoSmithKline dutasteride capsules and include GlaxoSmithKline in the "violation list":

The company's eligibility to participate in centralized drug procurement activities organized by the state from October 31, 2022 to
April 29, 2024 was suspended.

It has been nearly 10 years since GSK was fined RMB3 billion for bribery in 2013, and the last heavy fine almost led to GSK's withdrawal from the Chinese market
.

This time, why GSK again?

Is it as simple as taking it down?

GSK was fined because the State Food and Drug Administration found that the company did not conduct batch-by-batch and full inspection of dutasteride softgels exported to China in accordance with the registration standards, and there were deficiencies in the prevention and control of microbial contamination risks, and the comprehensive assessment concluded that the production quality management of this variety did not meet the requirements
of China's "Good Manufacturing Practice" (revised in 2010).

Dutasteride is a treatment for BPH, which is mainly used to treat moderate to severe symptoms of benign prostatic hyperplasia (BPH) with enlarged prostate gland, and reduce the risk of
acute urinary retention and surgery related to benign prostatic hyperplasia.

GlaxoSmithKline's original dutasteride was marketed in the United States in 2001, approved to enter China in 2011, and the patent expired
in 2015.
Data show that in 2021, the global sales of tamide are about 400 million US dollars, and the domestic sales are more than
3 million yuan.

In addition to GSK's original research drugs, there are three other generic drugs approved in China, namely Sichuan Guowei Pharmaceutical, Chengdu Shengdi, a subsidiary of Hengrui Pharmaceutical, and Qilu Pharmaceutical
.

In the fifth batch of national procurement, GSK's original drug and Chengdu Shengdi's generic drug won the bid at a price of 30.
96 yuan and 33.
1 yuan respectively, of which GSK's winning bid price was about 58%
lower than the highest effective declaration price.

Although GSK's dutasteride softgels have been removed from the shelves on major platforms and the qualification for national procurement has been canceled, the impact on GSK is limited
because the purchase agreement has expired at the end of October this year and the sales of the product in China are not large.

The impact is also very small
for patients.
The main products of benign prostatic hyperplasia drugs used in clinical use in China are tamsulosin, finasteride, terazosin, etc.
, in the market of more than 3 billion, dutasteride only accounts for a small part of the share, not to mention that there are three generic drugs to choose from
.

In contrast, the incident had a greater impact on GSK by suspending its 18-month centralized procurement qualification
.

With the normalization of centralized and quantitative procurement of drugs in the country, collective procurement will become the main means for
medical institutions to purchase drugs.
At present, national procurement generally carries out two batches a year, and the 18-month suspension means that GSK may miss three national opportunities, and the relevant drug market will be eroded
by generic drugs.

In the upcoming eighth batch of national procurement, GSK's original products are eligible for centralized procurement, namely amoxicillin clavulanate potassium tablets, lamotrigine tablets, and paroxetine hydrochloride enteric-coated sustained-release tablets
.

Among them, the domestic market size of amoxicillin clavulanate potassium preparation is about 6 billion yuan, and more than 4 generic drugs including North China Pharmaceutical have been evaluated; The scale of lamotrigine tablets in the domestic market is about 300 million yuan, and there are 3 generic drugs including Guilin Sanjin; The domestic market size of paroxidine enteric-coated sustained-release tablets is about 50 million yuan, and there are 3 generic drugs
including Salubris.

As more and more varieties of domestic generic drugs are evaluated, GSK original drugs that have lost their collective procurement qualifications will directly lose their market share
in the hospital.

The more far-reaching impact is that GSK's brand and reputation will be damaged, the brand will lose market trust, and the company's business in China may be frustrated
as a whole.

Why GSK again?

Returning to GSK itself, life has been quite turbulent
in recent years.

As sales of mature drugs continue to decline slowly, and new products have not yet grown into blockbuster bombs, GSK's performance has basically remained unchanged in the past three years
.

In 2021, GSK achieved operating income of GBP 34.
114 billion, an increase of 0.
04% year-on-year; The net profit attributable to the parent was 4.
385 billion pounds, a significant decrease of 23.
73%
year-on-year.

Among them, the epidemic business used to be GSK's signature business, but in 2021, when Pfizer, BioNtech and Moderna relied on the new crown seedlings to make a lot of money, GSK's epidemic business fell by 3%.

Sales of the highly anticipated 2-valent HPV and shingles seedlings in China were not as good as expected
.
GSK, once the top 10 vaccine producers in the world, has slipped to sixth place
.

At the same time, the policy orientation of the global pharmaceutical industry has also quietly changed
.

In May 2021, the UK's antitrust authorities announced that three multinational pharmaceutical companies, GlaxoSmithKline, Merck and Alley, had violated competition laws and fined each of them, of which GSK was fined 22.
2 million pounds (about 201 million yuan).

As a result, GSK has been shrinking its operations and downsizing its workforce
.

In February, GSK announced it would cut 650 jobs in the United States.
In April, GSK decided to accelerate the global cessation of adefovir ester, GSK's once blockbuster hepatitis B drug withdrew from the Chinese market
.

In July this year, GSK completed its largest restructuring in 20 years to focus on the development of innovative vaccines and drugs, and the consumer health business was spun off
separately.
In 2021, consumer health business revenue accounts for about 30% of its total revenue, which means that the new GSK volume has shrunk to about
two-thirds of its original volume.

The company's top management also changes
frequently.

In September, current CFO Iain Mackay decided to retire and be replaced by Julie Brown, Burberry's former CFO and COO.
In October, several foreign media reported that Roger Connor, president of Epidemic and Global Health, was about to leave
.

In the past, GSK's advantages in relying on the epidemic and rich original research products to fight the world are getting smaller and smaller, and it is also a last resort to shrink business and personnel, and GSK, which has been ranked among the top ten global pharmaceutical companies for many years, may withdraw from the list
.

Foreign companies that violate the quality red line will also be severely punished

According to the data of the National Medical Insurance Bureau, the average price reduction of selected drugs in the seven batches of centralized procurement has exceeded 50%, and the average price reduction of three batches of consumables has exceeded 80%, saving a cumulative cost of about 300 billion yuan
.

For patients, reducing medical expenses is undoubtedly a boon
.
But people can't help but worry that after pharmaceutical companies quote "low prices", can product quality be guaranteed?

In fact, since the centralized procurement of drugs, the winning bidder has been punished for supply interruptions or quality problems
.

As early as June 2019, Squibb's 4+7 selected variety of fosinpril sodium tablets was cut off in Hebei due to insufficient supply
.
However, at that time, the medical insurance credit evaluation system had not yet been established, so Squibb was able to retire
completely.

However, North China Pharmaceutical was not so lucky
.
In August last year, due to the supply cut-off of the third batch of ibuprofen sustained-release capsules, the first "supply interruption fine" received by the national centralized procurement, North China Pharmaceutical was included in the "violation list" and canceled its qualification
for national procurement declaration before May 10, 2022.

Since then, in the national and local centralized procurement, many pharmaceutical companies have cut off supply due to the epidemic, raw material price increases, and insufficient production capacity
.
This also includes a subsidiary of multinational giant Novartis, Sandoz cutting off the supply of losartan potassium tablets
.

Compared with the centralized procurement and supply cut-off, the quality problem is obviously a more untouchable red line
.

According to the official website of the State Food and Drug Administration, the State Food and Drug Administration has held several meetings to promote the quality supervision of selected drugs in centralized procurement to strengthen supervision and management and risk prevention and control
.

But even so, there are still pharmaceutical companies that have been exposed to potential quality and safety hazards, and most
of them are foreign companies.

In March 2020, some key production facilities of Celgene for injection paclitaxel (albumin-bound type) selected by the second batch of national procurement companies did not meet the basic requirements of China's drug production quality management and were suspended from importing, selling and using
.

In January 2022, the second batch of selected products from the state, glimepiride tablets produced by Shengjitang Pharmaceutical, did not meet the good manufacturing practices for drugs, and was included in the "violation list" and suspended from participating in the national centralized procurement for 18 months
.

In June 2022, the "loss on drying" project of some batches of bicalutamide tablets produced by India Sun Company, the fifth batch of national selected products, did not meet the registration standards for imported drugs, the products were suspended, stopped and recalled, and the eligibility of the selection of bicarutamide tablets of India Sun Company was canceled
.

From the above series of penalties, it can be seen that the quality supervision of collective procurement varieties is becoming more and more stringent, whether it is domestic or foreign capital, it is treated equally, and there is no tolerance
for quality problems.

Resources

1.
"Heavy! Import, sale and use of GSK's original research varieties suspended! Suspension of national procurement qualifications! Pharmaceutical, 2022-10-31

2.
"GSK national procurement is unqualified, included in the violation list or not qualified in the eighth batch?" Fengyun Medicine Talk, 2022-10-31

3.
"The strictest supervision of "national procurement": cancel the qualification of the selection, and cannot participate for one and a half years!" China Medical Security, 2022-10-31

4.
"Another foreign-funded giant faces spin-off, the fate of the Chinese market is uncertain", Medical Chinese Network, 2021-7-1