Well-known pharmaceutical companies are heavily fined for monopoly! Malicious price gouging will meet the regulator's heavy punch!

Jinyao Pharmaceutical Co.
, Ltd.
recently issued an announcement on the receipt of administrative penalty notices by subsidiaries, which has aroused widespread attention
in the market.

According to the announcement, the Management Commission of the Tianjin Municipal Supervision Bureau held that Tianjin Jinyao Pharmaceutical Co.
, Ltd.
, a subsidiary of Jinyao Pharmaceutical, violated the provisions of the Anti-Monopoly Law before the amendment on "selling goods at unfairly high prices or purchasing goods at unfairly low prices"; It is proposed to order Jinyao Pharmaceutical to stop the illegal acts and impose a fine of 27,721,311.
36 yuan
.

Industry insiders pointed out that judging from the existing law enforcement cases and successive policies and regulations, anti-monopoly has always been the focus of law enforcement in the
pharmaceutical field.
The regulatory authorities have also stated on many occasions that they will crack down on drug price gouging and resolutely and severely punish monopoly-related violations of laws and regulations; Paying fines is only a consequence of illegal acts, and more importantly, it will serve as a deterrent and warning to the industry
.

1

The huge penalty is nearly 30 million

Comprehensive rectification and reform to ensure the supply of medicines

Jinyao Pharmaceutical is a preparation manufacturer under Jinyao Pharmaceutical (holding ratio of 62%), according to this year's half-year report, it has 212 product numbers in 17 dosage forms such as injections, ointments, creams, hard capsules, pills, lyophilized powder injections, inhalation preparations, tablets
, etc.
Focusing on water injection preparation products, Jinyao Pharmaceutical has created a product group
with emergency drugs and shortage drugs as the core.

The product involved in the penalty, carmustine injection, is a member of Jinyao Pharmaceutical's shortage drug product group, because of its precise efficacy, it is a traditional anti-tumor drug
commonly used in clinical practice.
It is reported that due to high environmental protection and process requirements, Jinyao Pharmaceutical is currently the only pharmaceutical enterprise
producing this variety in the domestic market.
It has been reported that due to the shortage caused by insufficient supply of raw materials, carmustine injection has been frequently cut off before
.

The Tianjin Municipal Commission for Market Regulation held that Jinyao Pharmaceutical abused its dominant position in China's carmustine injection market by selling carmustine injection at an unfairly high price, which violated the provisions of Article 17, paragraph 1 (1) of the Anti-Monopoly Law before the amendment, which "prohibits business operators with a dominant market position from engaging in the following acts of abusing their dominant market position: (1) selling goods at unfairly high prices or purchasing goods at unfairly low prices"
.

According to the relevant regulations, the Tianjin Market Supervision and Administration Commission intends to order Jinyao Pharmaceutical to stop the illegal acts and impose a fine of 2% of the annual sales in 2019, totaling 27,721,311.
36 yuan
.
Jinpharm Pharmaceutical said that the above-mentioned fine accounted for 1.
91% and 23.
79% of Jinyao Pharmaceutical's operating income and net profit in the latest fiscal year, respectively, and 0.
74% and 25.
51%
of the audited operating income and net profit of the latest fiscal year within the scope of the company's consolidated statements.

If the penalty is finally determined, it is expected to reduce the net profit attributable to shareholders of the listed company by 17.
1872 million yuan
in 2022.
Jinyao Pharmaceutical said that at present, its subsidiary Jinyao Pharmaceutical has only received the "Administrative Penalty Notice", and there is still uncertainty
about the time when it will receive the formal penalty decision.

However, it is not the first time
that Jinyao Pharmaceutical has been fined for monopoly.
On April 28, 2021, Jinpharm Pharmaceutical received the Administrative Penalty Decision issued by the Tianjin Municipal Market Supervision and Administration Commission, for dividing the sales market of fluocinolone acetate API in the form of an agreement, changing and fixing the price of fluocinolone acetate API, eliminating and restricting competition in the field of sales of fluocinolone acetate API, and violating the relevant provisions of the Anti-Monopoly Law, and was fined a total of 44.
0226 million yuan
.

Industry insiders said that the two huge fines are enough to see the strength of the punishment of the regulatory authorities, but heavy fines are not the goal, punishing behaviors that disrupt the market, so that drug prices return to reasonable and drug supply is guaranteed
.

In this regard, Jinyao Pharmaceutical said that it has ordered relevant departments to immediately organize rectification as required, carry out planning and transformation in three aspects: channel distribution, terminal retail and ensuring necessary supply, formulate implementable sales plans, and take the initiative to significantly reduce the sales price of carmustine injection, increase sales, and ensure the supply
of drugs.

2

Never tolerate monopolistic behavior

Corporate compliance upgrades will be inevitable

The pharmaceutical industry is a key area of
market supervision.
In view of the outstanding problems such as rebates and market monopoly in the pharmaceutical field, the regulatory authorities have attached great importance to it in recent years, and they are also playing a guiding and regulating role in fully increasing the intensity of review and supervision to promote the price of pharmaceutical products to return to a reasonable level
.

It is worth noting that Jinyao Pharmaceutical has been "on the list" many times due to drug prices and supply problems, and has been named and interviewed by relevant regulatory authorities:

In August 2022, the Ministry of Industry and Information Technology, the National Health Commission, the National Health Insurance Administration, and the State Food and Drug Administration jointly issued a notice that 1,236 shortage drugs and manufacturers and 783 national organizations were monitored for selected varieties and manufacturers, of which Tianjin Jinyao Pharmaceutical's atropine sulfate injection was on
the list.

In May 2022, the centralized procurement network of drugs and medical consumables in Liaoning Province issued a notice on the investigation of drug prices and abnormal supply of drugs from March to April 2022, and the abnormal price and supply of methylprednisolone succinate sodium and nicosamib injection of Tianjin Jinyao Pharmaceutical were named
.

In February 2021, the Liaoning Provincial Centralized Procurement Network for Drugs and Medical Consumables issued a notice on the investigation of drug prices and abnormal supply of drugs in January 2021, in which Tianjin Jinyao Pharmaceutical's atropine sulfate injection was pointed out to require further investigation
due to abnormal price and supply.

In March 2017, the Gansu Health and Family Planning Commission issued a notice that Tianjin Jinyao Pharmaceutical was involved in raising the actual supply price without authorization and was interviewed by the regulatory authorities
.

In the face of repeated offenders such as Jinyao Pharmaceutical, the regulatory authorities have always dealt a heavy blow
to this.
Industry experts pointed out that the two huge fines have shown that the regulatory authorities will not tolerate it, and if the relevant pharmaceutical companies still have a fluke mentality, they may usher in heavier penalties
.

It is not difficult to see that trying to rely on the advantages of the corresponding field to significantly increase the price of drugs and other monopolistic behaviors are now dead
.
In order to curb and crack down on the monopolistic behavior of pharmaceutical companies such as Jinyao Pharmaceutical, the regulatory authorities have been focusing on anti-monopoly investigations in the pharmaceutical field, severely punishing monopoly supply cuts and price increases:

In February 2017, the State Administration for Industry and Commerce issued a fine of 2.
2092 million yuan to Wuhan Xinxing Elite Pharmaceutical Co.
, Ltd.
, which monopolized methyl salicylate APIs, and in the same month, the National Development and Reform Commission issued a notice against Shandong Weifang Longshun He Pharmaceutical Co.
, Ltd.
, which had a previous record of API monopoly, for violently obstructing the anti-monopoly investigation.

In July 2017, the National Development and Reform Commission (NDRC) was fined RMB443,900 for abusing their dominant market position by Zhejiang Xinsai Pharmaceutical Co.
, Ltd.
and Tianjin Handway Pharmaceutical Co.
, Ltd.
for abusing their dominant market position, selling isoniazid APIs at unfairly high prices and refusing to trade without legitimate reasons.

In January 2019, the State Administration for Market Regulation imposed administrative penalties on two API, Henan Jiushi Pharmaceutical Co.
, Ltd.
and Hunan Erkang Pharmaceutical Operation Co.
, Ltd.
: ordered the two enterprises involved in the case to stop their illegal acts, confiscated 2.
3947 million yuan of illegal gains from Hunan Erkang Pharmaceutical Operation Co.
, Ltd.
, and imposed a fine of 8.
4794 million yuan on 8% of the sales volume of the previous year; Henan Jiushi Pharmaceutical Co.
, Ltd.
was fined 4% of the sales of the previous year, amounting to 1.
5573 million yuan
.
The two enterprises involved in the case imposed a total of 12.
4314 million yuan in fines and confiscations
.

Since 2020, the regulatory authorities have further increased
the relevant anti-monopoly punishment.

In April 2020, the State Administration for Market Regulation reported the largest fine issued in the field of APIs since the implementation of the Anti-Monopoly Law, and three pharmaceutical companies, including Shandong Kanghui Pharmaceutical Co.
, Ltd.
, Weifang Puyunhui Pharmaceutical Co.
, Ltd.
and Weifang Helioshen Pharmaceutical Co.
, Ltd.
, were fined a total of 325.
5 million yuan
for abusing their dominant market position, causing the price of calcium gluconate APIs to skyrocket.

In April 2021, the State Administration for Market Regulation imposed a fine of RMB764 million on Yangzijiang Pharmaceutical for implementing a vertical price monopoly agreement, setting a record
for anti-monopoly fines in China's pharmaceutical industry.

It is not difficult to see that the regulatory authorities will increase the law enforcement of pharmaceutical companies, and heavy-handed supervision will become the norm in the
future.
On November 18, 2021, the State Anti-Monopoly Administration was officially inaugurated in the office building of the State Administration for Market Regulation; On the same day, the Anti-monopoly Guidelines of the Anti-Monopoly Commission of the State Council on the Field of APIs were released, which marked the upgrading
of the anti-monopoly law enforcement system.

On June 8 this year, the State Administration for Market Regulation released the Annual Report on China's Anti-Monopoly Law Enforcement (2021), which pointed out that in 2021, a total of 3 cases of monopoly agreements in the pharmaceutical industry and 3 cases of abuse of market dominance were investigated and handled; 6 cases of abuse of administrative power to eliminate or restrict competition; 26 cases of concentration of undertakings in the pharmaceutical industry were
concluded.

The market view is that with the tightening of the linkage between regulatory authorities, a series of measures launched will inevitably make the pharmaceutical market strongly purified
.
Industry analysts believe that the problem of heavy-handed monopoly and severe punishment of price violations and illegal sales are to meet the needs of the economic development of the times; Pharmaceutical companies need to recognize the current situation, continuously improve the level of compliance management, and jointly create a fair and just business environment
for the pharmaceutical industry.