30/03/2022

This chapter first appeared in the Global Competition Review’s Asia-Pacific Antitrust Review 2022- Pharmaceuticals.


This chapter explores the main developments in competition law enforcement in the pharmaceuticals and medical products sectors in the Asia-Pacific region in the past 18 months, discussing the efforts of Asia-Pacific competition authorities to pursue potential infringements by companies in these sectors and their readiness to impose significant sanctions. Looking ahead, it considers the potential focus of further competition law enforcement as it relates to these sectors in the Asia-Pacific region.

Key discussion points

  • Cartels and anticompetitive agreements relating to the supply and distribution of pharmaceuticals and medical products;
  • China and Hong Kong competition law authorities have also taken strong action against abuses of dominance;
  • competition law authorities in India and the Philippines have undertaken studies and continue to monitor the pharmaceutical sector, and cases motivated by concerns about pricing and access to essential medicines and medical products.

Referenced in this article

  • Australian Competition and Consumer Commission (ACCC);
  • State Administration for Market Regulation (SAMR);
  • Hong Kong Competition Commission (HKCC);
  • Competition Commission of India (CCI);
  • Japan Fair Trade Commission (JFTC);
  • Korea Fair Trade Commission (KFTC);
  • Taiwan Fiar Trade Commission (TFTC) and
  • Philippine Competition Commission (PCC).

Australia

In Australia, unlike the digital economy to which the ACCC has dedicated significant resources, the pharmaceutical and medical products sectors are not currently identified as a priority area. However, the ACCC has taken some significant cases against companies in these sectors in recent years.

Cartels are an enduring priority for the ACCC’s enforcement activity and one of the three ACCC criminal cartel prosecutions currently being pursued before the Australian courts involves the pharmaceutical sector.

On 1 December 2020, the Commonwealth Director of Public Prosecutions (CDPP) filed criminal charges against Alkaloids of Australia Pty Ltd (Alkaloids of Australia) and its former export manager, Christopher Kenneth Joyce, for cartel conduct relating to the supply of active pharmaceutical ingredient scopolamine N-butylbromide (SNBB) in contravention of the Competition and Consumer Act 2010 (CCA), following a criminal investigation by the ACCC. (R v. Alkaloids of Australia Pty Limited, case number 2020/00347778, and R v. Christopher Kenneth Joyce, case number 2020/00347777 (Downing Centre Local Court, Sydney, NSW).  Section 45AD of the CCA sets out the requirements for a cartel provision. Section 45AF makes it a criminal offence to enter into a contract, arrangement or understanding that contains a cartel provision. Section 45AG makes it a criminal offence to give effect to a cartel provision.)  

Alkaloids of Australia and Mr Joyce were both originally charged with 33 criminal cartel offences spanning a period of almost 10 years from 24 July 2009, relating to allegations that Alkaloids of Australia and other overseas suppliers of SNBB made and gave effect to arrangements to fix prices, restrict supply, allocate customers or geographical markets, or both, or rig bids for the supply of SNBB to manufacturers of generic antispasmodic medications.

 On 26 October 2021, Mr Joyce pleaded guilty to three charges and admitted guilt in respect of a further seven offences involving criminal cartel conduct. Three weeks later, on 16 November 2021, Alkaloids of Australia also pleaded guilty to three charges and admitted a further seven offences. Mr Joyce and Alkaloids of Australia have been committed to the Federal Court of Australia for sentencing. While all 66 sequences on the initial charge sheets were withdrawn, the remaining charges involved (a) for Alkaloids of Australia, intentionally making and attempting to enter into contracts, arrangements or understandings containing cartel provisions, and giving effect to cartel provisions, involving fixing the sale price of SNBB, fixing bid prices for the supply of SNBB and restricting the supply of SNBB; and (b) for Mr Joyce, aiding, abetting or procuring Alkaloids of Australia’s contraventions of the cartel provisions, intentionally attempting to make contracts or arrive at understandings containing cartel provisions or inducing others to do so, and being knowingly concerned in giving effect to cartel provisions. The Alkaloids of Australia case is the fourth criminal cartel case brought by the ACCC that has been resolved by guilty pleas, and the first in which a guilty plea has been entered by an individual in addition to a corporate defendant.

Following the repeal of a safe harbour exemption for licensing arrangements in the CCA in September 2019, all intellectual property assignments or licensing arrangements are subject to the full operation of the CCA, including the cartel prohibitions. (Section 51(3) of the CCA provided a limited exemption for conditional licences or assignments of specified intellectual property rights.) The repealed provision provided a limited exemption for conditional licences or assignments of patents, registered designs, copyrights and protected circuit layouts. However, it did not exempt conduct that contravened the prohibitions on misuse of market power or resale price maintenance. There have been reports of the ACCC’s Cartels Branch initiating investigations in the past few years regarding restrictions in distribution, licensing or settlement agreements for pharmaceuticals. However, there is no public information to verify these reports at this stage. If parties to an assignment or licence of intellectual property rights could be competitors, it is important to assess whether there are any conditions that set prices, restrict output or sales, or allocate markets (including disease areas, customers and territories), which could be viewed as cartel provisions. In addition to exposing the parties to prosecution, conditions that contravene the CCA would also be void and unenforceable.

During September and October 2020, in the context of the covid-19 pandemic, the ACCC granted a number of final authorisations to allow members of various pharmaceutical industry associations, pharmaceutical wholesalers, medical oxygen suppliers and suppliers of medical equipment respectively to cooperate to ensure security of supply of essential medicines and related devices, pharmacy products, medical oxygen, medical equipment and related supplies if there are shortages resulting from the pandemic. These authorisations are subject to conditions that allow the ACCC to monitor the authorised conduct. Under the CCA, the ACCC may grant authorisations to provide businesses with legal protection for conduct that might otherwise contravene the CCA but is not harmful to competition or is likely to result in overall public benefits, or both. The ACCC also granted a number of interim authorisations in early 2020, at the beginning of the pandemic, in some cases in extremely short time frames. 

On 6 September 2021, pharmaceuticals wholesalers applied for re-authorisation to continue to cooperate in providing access to essential medicines and pharmacy products during the continuing COVID-19 pandemic.  On 13 September 2021, the ACCC granted an interim authorisation to pharmaceutical wholesalers to allow the cooperation to continue while the ACCC considers the re-authorisation application.  On 17 February 2022, the ACCC made a determination granting re-authorisation to enable the cooperation to continue, including in relation to the distribution of covid-19 vaccines, subject to a monthly reporting condition. The re-authorisation has been granted until 28 February 2023.

China

In China, SAMR has continued to strongly enforce competition law in the pharmaceuticals and medical products sectors. Competition law enforcement under China’s Anti-Monopoly Law 2008 (AML) has been used in conjunction with other regulations and policy reforms to address concerns in these sectors, such as increasing prices and supply shortages. (See for example the ‘Notice on Implementation Guidelines for Promoting the Two-Invoice System for Pharmaceutical Procurement by Public Health Institutions’.)

SAMR has focused its AML enforcement activities in the pharmaceutical industry on abusive conduct involving excessive pricing, refusals to supply and imposing unfair trading conditions by domestic suppliers of active pharmaceutical ingredients (APIs). Article 17(1) of the AML prohibits dominant undertakings from supplying products at excessive prices. Article 17(3) of the AML prohibits dominant undertakings from refusing to deal with counterparties without a reasonable justification. Article 17 (5) of the AML prohibits dominant undertakings from imposing unfair trading conditions. The API sector has been the subject of competition law scrutiny for several years.  The AML has also been applied to anticompetitive price-fixing and market-sharing agreements among competing firms in this sector. Article 13 of the AML prohibits agreements among competitors to eliminate or restrict competition in the market.

On 9 April 2020, SAMR imposed record penalties on three API distributors, Shandong Kanghui Medicine Company Limited (Kanghui), Weifang Puyunhui Pharmaceutical Company Limited (Puyunhui) and Weifang Taiyangshen Company Limited Pharmaceutical (Taiyangshen), for abuse of collective dominance by charging excessive prices and imposing unfair trading conditions in the supply of injectable calcium gluconate. SAMR found that Kanghui de facto controlled the other two companies on the basis of their close operating relationships, including that Kanghui’s senior management owned Puyunhui, numerous employees simultaneously held positions in both Kanghui and Puyunhui, and Kanghui gave instructions to Puyunhui and Taiyangshen regarding commercial operating decisions, including making transactions with some of its customers through Puyunhui and Taiyangshen. SAMR also determined that Kanghui had set up the other two companies to gradually transfer its API distribution business and evade competition law investigations. SAMR therefore considered the three companies as one group despite the lack of an equity relationship.

The excessive pricing conduct involved the companies supplying the API at sale prices with a markup 9.5 to 27.3 times the cost of purchasing the API from manufacturers, increasing the price to customers by 19 to 54.6 times the historical market price and entering into series of internal transactions to artificially increase pricing. SAMR appears to have considered the sale price excessive on the basis that it was disproportionate to cost compared with the price of the same product over time.

The API was used to make finished injection products that were included on the national essential medicines list. The unfair trading conditions involved the companies requiring their customers sell back the finished injection products or controlling their customers’ transactions to supply the finished injection products, including determining the selling prices and counterparties.

The fines totalled 204.5 million renminbi and SAMR also confiscated illegal gains totalling 121 million renminbi from the three companies. The confiscation of illegal gains has been rarely imposed in the past given disagreements about the calculation of the illegal gains.

For obstruction of the investigation by concealing, destroying and relocating evidence, SAMR also imposed maximum fines of 1 million renminbi each on Kanghui and Puyunhui, and fined 14 individuals working for the two companies between 20,000 and 100,000 renminbi. It has been reported that 13 of the individuals were placed in criminal detention for violently resisting the dawn raids and injuring officials. This was the harshest punishment to date that SAMR has imposed on companies and individuals for obstruction of an investigation.

Kanghui and Puyunhui have both filed administrative lawsuits challenging SAMR’s penalty decision.  See cases (2021) Jing Xing Chu No.1 (Kanghui) and (2021) Jing Xing Chu No.2 (Puyunhui) before the Beijing High People’s Court.  The lawsuits were initially filed in the Beijing No.1 Intermediate People’s Court and were transferred to the higher jurisdiction of the Beijing High People’s Court due to their complexity. At a hearing on 22 November 2021, Kanghui and Puyunhui challenged SAMR’s market definition and market share calculations by claiming SAMR had made factual errors.  Kanghui and Puyunhui also claimed that SAMR had made procedural errors in handling the case, including in an administrative hearing, and claimed that SAMR had based the fines on the incorrect type of revenue. At the hearing, SAMR rejected each of the claims made by Kanghui and Puyunhui. This is the first time that a SAMR penalty decision has been challenged in court. There is currently no indication when judgments will be delivered in these lawsuits.

On 22 January 2021, SAMR announced that it had imposed penalties of 100.7 million renminbi on Simcere Pharmaceutical Group (Simcere) for abuse of dominance by refusing to supply the API, batroxobin (an enzyme purified from snake venom), to downstream competitors. In April 2019, Simcere had signed a cooperation and supply agreement with Swiss-based DSM Pentapharm, the only global manufacturer of batroxobin. SAMR determined that Simcere had a monopoly on the supply of the API in China which is used in batroxobin injections to treat obstructive vascular diseases.  SAMR found that Simcere was developing a batroxobin injection for potential market entry and had forced competing manufacturers of batroxobin injections to withdraw from the downstream market by refusing to quote or supply the API.  SAMR determined that this was a refusal to deal without justification and an abuse of Simcere’s dominance in the supply of the API, which had destabilised the supply of batroxobin injections to patients.  The fine imposed represented 2% of Simcere’s revenue for 2019.

SAMR’s enforcement efforts in relation to the API sector have also been supported by action taken by regional market regulation authorities. On 30 April 2021, Tianjin Administration for Market Regulation (Tianjin AMR) imposed fines of 39 million renminbi and confiscated illegal gains of 11.8 million renminbi from Tianjin Tianyao Pharmaceuticals Co. Ltd (Tianyao), Tianjin Pacific Chemical & Pharmaceutical Co. Ltd (Pacific) and Shenzhen Fuhaitong Pharmaceuticals Co. Ltd (Fuhaitong) for market allocation and price fixing in relation to the supply of the API, fluocinolone acetonide (used for topical skin treatments). Tianyao and Pacific were the only manufacturers of the API in China and they also distributed the API.  Fuhaitong became a distributor of imported fluocinolone acetonide in China in 2018. The Tianjin AMR found that Tianyao and Pacific first entered into an agreement to allocate markets and raise prices for fluocinolone acetonide from 2008 until 2013.  In 2014, Tianyao and Pacific’s agreement was disrupted by the importation of fluocinolone acetonide but in 2017 they started to cooperate to control the supply of the imported API and then resumed their earlier market allocation and price fixing practices. In 2018, when Fuhaitong started distributing the API in China, it joined the arrangements with Tianyao and Pacific.

On 27 September 2021, the Henan Administration for Market Regulation (Henan AMR) imposed a penalty of 11 million renminbi on Shangqiu Xinxianfeng Pharmaceutical (Xinxianfeng) for abuse of dominance in the sale of the API, phenol, in China (mainly used in preparations to sterilize surgical instruments). The penalty included a fine amounting to 1% of Xinxianfeng’s revenue in 2016 and confiscation of illegal gains. Xinxianfeng had entered into an exclusive distribution agreement for phenol with the only manufacturer of the API in China, Chongqing Southwest No.2 Pharmaceutical Factory.  The Henan AMR found that Xinxianfeng had a market share for the API ranging from 82.95% and 100% between 2014 and 2017 resulting from that distribution agreement and other tactics, including bulk purchasing.  On the basis that Xinxianfeng’s market share was greater than 50%, it was deemed to be dominant and the Henan AMR determined that Xinxianfeng abused its dominance by forcing hospitals and manufacturers of phenol preparations to pay unfairly high prices for phenol (6.8 to 9.2 times the historical market prices).

On 18 November 2021, the Shanghai Administration for Market Regulation (Shanghai AMR) imposed a penalty of 6.6 million renminbi on Nanjing Ningwei Pharmaceutical (Ningwei) for abuse of dominance in the supply of the API, pralidoxime chloride (used for injections to treat pesticide poisoning), in China by imposing unfairly high prices and unreasonable trading terms.  The penalty included a fine amounting to 4% of Ningwei’s revenue in 2019 and confiscation of illegal gains. Ningwei was the exclusive distributor for the only company that was manufacturing the API during the relevant period.  The Shanghai AMR determined that the sales price charged by Ningwei was unfairly high on the basis that it was 5 to 10 times the prices at which it purchased the API and 26.09 to 52.17 times the historical market prices.  The unreasonable trading terms included requiring a customer pay substantial damages for breach of contract if it did not purchase a fixed amount, setting a minimum purchase amount that exceeded the customer’s actual demand for the API, and requiring a customer pay technical fees when no technical services were provided.

On 18 November 2021, SAMR published the final ‘Antitrust Guidelines in the Field of Active Pharmaceutical Ingredients’ which provide guidance for the API sector on the types of business practices that might contravene the AML including refusals to deal, tying and discriminatory behaviour. The guidelines also provide information about SAMR’s approach to market definition and the circumstances in which the product dimension of the market might be broader than a single API. The guidelines are intended to assist SAMR’s enforcement activities in the API sector and increase compliance with the AML by providing greater legal certainty. SAMR stated that the API sector will remain an enforcement priority area following the publication of these guidelines.

Private lawsuits claiming AML contraventions are also emerging in the API and pharmaceuticals sectors.  On 18 March 2020, the Nanjing Intermediate People’s Court awarded Yangtze River Pharmaceuticals Group and its subsidiary Hairui Pharmaceutical (collectively, Yangtze) a record amount of 68.8 million renminbi as damages in a private lawsuit alleging abuse of a dominant position in the supply of the API, desloratadine citrate disodium (DCD). Yangtze alleged that Hefei Yigong Pharma and its subsidiary (Yigong) abused its dominance by refusing to supply DCD unless Yangtze agreed to long-term exclusive dealing provisions with volume and price commitments, with the purpose of hindering a potential new entrant in DCD supply. Yangtze also alleged that Yigong charged excessive prices for the supply of DCD. In addition to imposing record damages, the court invalidated the long-term exclusive purchase obligation and volume and price commitments in Yigong’s supply agreement with Yangtze.

Yigong has appealed the ruling to the Supreme People’s Court. In a hearing on 18 December 2020, Yigong disputed the lower court’s findings in relation to market definition and dominance and claimed that the court had made procedural errors.  The case is still under consideration by the Supreme People’s Court. See case (2020) Zui Gao Fa Zhi Min Zhong No.1140 before the Intellectual Property Tribunal of the Supreme People’s Court.  The record private damages award to Yangtze is likely to encourage similar private lawsuits, which adds a further risk for dominant companies engaging in abusive behaviour in China, particularly in the API sector, which is expected to remain an enforcement priority for SAMR.

In the pharmaceuticals sector, the AML continues to be applied to address resale price maintenance (Article 14 of the AML prohibits the fixing of resale prices or setting minimum resale prices) in agreements with firms at different levels of the supply chain.  On 15 April 2021, SAMR announced that it had imposed penalties of 764 million renminbi on Yangtze River Pharmaceutical Group (Yangtze River) for engaging in resale price maintenance from 2015 until 2019. This fine is equivalent to 3% of Yangtze River’s revenue for 2018.  SAMR determined that Yangtze River had agreed standard form contracts with first and second-tier distributors and retail pharmacies that included provisions fixing and restricting resale prices for medicines.  Yangtze River also enforced compliance with the pricing restrictions through letters and telephone calls asking distributors and pharmacies to adjust their retail prices in accordance with the restrictions, and penalised non-compliance by deducting bonuses, suspending reimbursement of expenses, and terminating supply.  Yangtze River also engaged third parties to monitor compliance with its pricing restrictions. SAMR found that Yangtze River’s conduct restricted competition and harmed consumers and noted that drug prices have a significant effect on the broader economy and the price of medical treatment for consumers.  

These cases illustrate the ongoing focus on the pharmaceuticals sector, particularly in relation to APIs, by Chinese antitrust authorities at both a national and regional level.

Hong Kong

In the six years since the Hong Kong Competition Ordinance came into force in December 2015, the HKCC has been building its enforcement experience. Among the first key enforcement actions taken by the HKCC was its commencement of court proceedings against a medical gas supplier.

 On 21 December 2020, the HKCC initiated proceedings in the Competition Tribunal against Linde HKO Limited and Linde GmbH (collectively, Linde) for abuse of a substantial degree of market power in the supply of certain medical gases in Hong Kong. The Second Conduct Rule of the Competition Ordinance (Cap 619) prohibits the abuse of a substantial degree of market power by businesses engaging in conduct that has the object or effect of harming competition in Hong Kong. The former general manager of the relevant division of Linde HKO Limited, Tse Chun Wah, is also a respondent for his alleged active involvement in formulating and executing the conduct.   This is the first case pursued by the HKCC in the Competition Tribunal in relation to abuse of substantial market power.

Linde is alleged to have abused its de facto monopoly position in the supply of certain medical gases to exclude its only potential competitor in the downstream medical gas pipeline system maintenance market for public hospitals, MGI (Far East) Limited (MGI), by refusing to supply or limiting supply of medical gases necessary for MGI to carry out its maintenance services. Linde is also alleged to have imposed unreasonable and/or arbitrary trading terms on MGI to prevent it from performing maintenance services contracts.

The HKCC is seeking declarations, injunctions, and orders for pecuniary penalties against Linde and the former general manager, as well as a director disqualification order against that general manager and an order that Linde implement an effective compliance programme. The HKCC emphasised that the serious impact of the conduct on public hospitals was an important factor in the decision to bring enforcement action. An initial hearing was held before the Competition Tribunal on 7 October 2021 which focused on the scope of document production requests by the HKCC.  The next case management conference before the Competition Tribunal has been set for 18 May 2022.  The initiation of these court proceedings indicates that the HKCC is ready to take strong enforcement action to address abusive conduct by companies with substantial market power in Hong Kong, particularly when the conduct impacts the delivery of health services to patients in Hong Kong.

India

The CCI has investigated numerous allegations of anticompetitive practices in the pharmaceutical sector. These investigations have been largely concerned with alleged anticompetitive agreements in the distribution of pharmaceuticals and have particularly scrutinised the practices of industry associations, and the involvement of pharmaceutical companies and their executives in supporting those practices. Section 3 of the Competition Act, 2002, prohibits anticompetitive agreements. These cases focus on alleged contraventions of Section 3(3)(b) read with Section 3(1) of the Competition Act.

The CCI continues to be particularly concerned with a practice of district level chemists and druggists associations to require a ‘No-Objection Certificate’ (NOC) prior to the appointment and supply of pharmaceuticals to distributors or druggists. See the Order under Section 27 issued on 30 August 2018 in M/s Alis Medical Store & Ors and Federation of Gujarat State Chemists & Druggists Associations (FGSCDA) and Ors (Case Nos. 65, 71 & 72/2014 and 68/2015) and more recent orders issued on 12 March 2020 in the cases of Shri Suprabhat Roy, Proprietor, M/s Suman Distributors v. Shri Saiful Islam Biswas, District Secretary of Murshidabad District Committee of Bengal Chemists & Druggists Association & Others (Case Nos. 36/2015, 31 & 58/2016); and on 3 June 2019 in Madhya Pradesh Chemists and Distributors Federation (MPCDF) v. Madhya Pradesh Chemists and Druggist Association (MPCDA) & Others (Case No. 64 of 2014). The CCI has found this practice results in limiting and controlling the supply of pharmaceuticals in India. Individuals from various pharmaceutical companies have also been held liable for such practices either through active involvement or holding key positions in the respective associations that engaged in the anticompetitive practice. Liability was found under Sections 48(1) and (2) of the Competition Act, 2002.  Cease and desist orders and substantial penalties have been imposed on the associations, pharmaceutical companies and individuals.

Other practices of chemists and druggists associations that the CCI has previously determined were anticompetitive and continues to investigate include obligations upon pharmaceutical companies to pay these associations compulsory product information service charges to launch their new products. See the Order under Section 27 issued on 20 June 2019 in Mr Nadie Jauhri v. Jalgaon District Medicine Dealers Association (JDMDA) (Case No. 61 of 2015).

As a recent example, on 13 March 2020, the CCI issued a cease and desist order against pharmaceutical companies Alkem Laboratories (Alkem) and Macleods Pharmaceuticals (Macleods) and the Bengal Chemists and Druggists Association (BCDA).  The CCI had found that Alkem and Macleods agreed with the BCDA to demand that prospective stockists of their drugs provide Stock Availability Information (SAI) or a NOC from the BCDA before they would commence supplying their drugs.  The BCDA charged a fee to prospective stockists in exchange for providing SAI or a NOC. The CCI ordered that the parties cease and desist from engaging in such practices in the future but decided not to impose penalties because the BCDA had taken steps toward ending the practice of requiring a NOC or SAI, and Alkem and Macleods had admitted to the conduct and contended they were acting under duress, threat or direction from the BCDA.

On 18 November 2021, the CCI released the findings of a market study of the pharmaceutical sector in India which it had launched in October 2020. See CCI’s ‘Market Study on the Pharmaceutical Sector in India: Key Findings and Observations’, 18 November 2021.  The study was initiated due to the importance of access to affordable, quality medicines for public health and the numerous competition law cases relating to the pharmaceutical sector in India. Another factor in the CCI’s decision to launch the study was the covid-19 pandemic, which had increased demand and accelerated consumer spending on healthcare in India.

The study found that there is a prevalence of branded generics in India and a high degree of price variation between different generics of the same molecules, with branded generics likely to have higher prices than unbranded generics. The CCI found that this was likely driven by consumer perceptions of the higher quality of certain brands which was reinforced by the marketing strategies of pharmaceutical companies to achieve a brand premium on prices.  The CCI considered that consumer preferences for branded drugs was a barrier to effective price competition for generics in India. The CCI noted the difficulty of obtaining information about the quality of low-priced generic versions and considered that it was important to dispel concerns about drug quality to increase price competition.  The CCI noted that large-scale public information campaigns could be launched to raise consumer awareness of the cost efficiency and efficacy of generic drugs.

In relation to the practices of industry associations, the CCI observed that feedback received in the study indicates that the CCI’s enforcement efforts have generally had a positive impact to discontinue mandatory requirements for NOCs to appoint stockists and levying product information service charges for the introduction of new drugs, although some instances of these practices persist. 

Regarding trade margins, the CCI warned that it would continue to target enforcement and advocacy efforts to deter and prevent industry associations and competing players across the pharmaceutical supply chain from colluding on trade margins and fixing, restricting or discouraging discounts by chemists and stockists.

The study also considered the recent growth of online e-pharmacies in India and concerns about the collection, storage, securing and sharing of sensitive personal data of consumers (which the CCI noted could be a competition harm). The CCI recommended that e-pharmacies adopt self-regulatory measures at an industry level on safeguarding privacy when collecting, using, and sharing of data.

Japan

The JFTC has continued to take strong action against collusion between competitors in the pharmaceutical sector in Japan.

On 5 March 2020, the JFTC imposed administrative sanctions in a case relating to the pharmaceutical industry. The JFTC issued a cease-and-desist order and imposed a fine of ¥2.87 million on Torii Pharmaceutical Corporation Limited for violating the Anti-Monopoly Act by agreeing with Nippon Chemiphar Corporation Limited (Nippon Chemiphar) to set a target wholesale price of a branded medicine for high blood pressure. See article 3 of the Anti-Monopoly Act. The JFTC did not impose sanctions on Nippon Chemiphar because it had filed a leniency application before the JFTC opened its investigation.

On 9 December 2020, the Tokyo District Public Prosecutors Office (public prosecutors) charged three Japanese pharmaceutical wholesalers Alfresa Corporation (Alfresa), Suzuken Corporation (Suzuken) and Toho Pharmaceutical Corporation (Toho), and seven officials at the three companies, with bid-rigging in relation to the supply of prescription medicines in violation of the Anti-Monopoly Act. Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (Act No. 54 of 14 April 1947) (the Anti-Monopoly Act). See article 3 of the Anti-Monopoly Act, which prohibits unreasonable restraints of trade. The public prosecutors pressed charges pursuant to a criminal complaint filed by the JFTC against the companies and officials earlier that day. The defendants are alleged to have fixed the winners of contracts for the supply of prescription medicines to 57 hospitals operated by the Japan Community Health Care Organisation (JCHCO) in June 2016 and June 2018. The leading pharmaceutical wholesaler, Mediceo Corporation, was also involved in the alleged conduct but has not been charged by the public prosecutors because it had filed a leniency application before the JFTC opened its investigation. The JFTC had previously imposed administrative sanctions on the defendants for a price cartel in the Miyagi Prefecture in 2002. In the case of Alfresa Corporation, its predecessor organisations were involved in the earlier violations. The JFTC noted that it had pursued criminal charges due to the repeated violations of the Anti-Monopoly Act. It also emphasised that the conduct had a significant impact on consumers and the burden of healthcare costs because it related to pharmaceuticals as essential products. In addition to the criminal prosecution, Japan’s National Health Organisation and the JCHCO have each suspended the companies from bidding for tenders for two years and one year respectively. On 30 June 2021, the Tokyo District Court imposed fines of ¥250 million on each of Toho, Suzuken and Alfresa. The Court also imposed suspended sentences ranging from 18 months to two years on seven executives from the three companies. The companies and their executives had pleaded guilty to all charges. The court referred to the bid-rigging conduct as malicious and serious with an extensive impact on people’s lives.

The JFTC has continued its focus on bid-rigging in relation to pharmaceutical supply contracts to hospital groups with reports that the JFTC had conducted dawn raids on 9 November 2021 on six pharmaceutical wholesalers including subsidiaries of Alfresa, Suzuken and Toho. According to the reports, it is alleged that, since 2016, the wholesalers engaged in bid-rigging for tenders to supply hospitals in the Kyushu region. The JTFC has not yet announced the investigation.

These cases illustrate the JFTC’s ongoing focus on bid-rigging in the pharmaceuticals sector and the substantial risk of sanctions and even criminal charges if companies do not cooperate with the JFTC in advance of the cartel investigation being launched.

Philippines

In the Philippines, the health and pharmaceutical industry remains one of the PCC’s priority sectors for enforcement.  Following the completion of an industry scoping study and publication of an issues paper and policy note in 2020 which identified key challenges in the Philippine pharmaceutical industry, the PCC warned pharmaceutical companies to expect more scrutiny in the future. See PCC Issues Paper No. 02, Series of 2020, ‘A Profile of the Philippine Pharmaceutical Industry’, Celia M Reyes and Aubrey D Tabuga, and Policy Note No. 2, Series of 2020, ‘Identifying Challenges in the Philippine Pharmaceutical Industry’, Celia M Reyes and Aubrey D Tabuga.

In 2021, the PCC pursued enforcement actions involving companies in the healthcare industry.  On 10 January 2022, the Chairperson of the PCC announced the PCC’s 2021 Year-end Report which stated that the Competition Enforcement Office of the PCC opened 10 full administrative investigations in 2021 with healthcare companies among the firms investigated. See PCC 2021 Year-end Report, ‘Competition in 2021: Strengthening Foundations for Inclusive Recovery and Sustained Growth’.  The 2021 Year-end Report also mentioned that one of the two Statements of Objections filed by the PCC’s Competition Enforcement Office with the Commission involved an alleged price-fixing cartel in the healthcare industry. See Section 14(a) of the Philippine Competition Act which prohibits price fixing.  This matter will now proceed to adjudication.

The 2021 Year-end Report also highlighted that the PCC convened the Pharmaceutical Technical Advisory Group (PTAG) in September 2021 which is comprised of sectoral experts in economics, medicine, regulatory policy, and competition policy, to advise and assist the PCC and its partner agencies in initiating more procompetitive strategic interventions in the sector. 

South Korea

As one of the Asia-Pacific’s toughest enforcers, in the last few years, the KFTC has been active in pursuing alleged abuses of dominance in connection with pharmaceuticals, medical equipment and devices. On 22 January 2021, the KFTC announced that its 2021 enforcement priorities would include a focus on the pharmaceutical sector.

Pursuant to this enforcement priority, on 19 April 2021, the KTFC imposed a fine of 16 million won on Abbott Korea and imposed corrective orders on Abbott Korea and Medtronic Korea for offering illegal rebates to induce cardiologists to use their cardiovascular stents in violation of the Fair Competition Code on Transactions of Medical Devices, which had been voluntarily adopted by the Korea Medical Devices Industry Association.  The illegal rebates were in the form of financial support for cardiologists to attend international conferences to encourage them to use each company’s cardiovascular stents. Abbott Korea and Medtronic Korea have a combined share of around 70-75% of the market for cardiovascular stents in Korea. The KTFC has committed to continue monitoring for violations involving financial support to doctors to attend international conferences as inducement for the use of medical devices.

On 3 May 2021, the KTFC also imposed fines of 2.297 billion won on Daewoong Pharmaceuticals (Daewoong) for abusing the patent infringement litigation system by filing unmeritorious patent infringement claims against competitors to hinder their sale of generic versions of its drugs, Albis and Albis D, for the treatment of gastrointestinal disease. The KFTC found that Daewoong had sued Pharvis Korea (Pharvis) for patent infringement, preventing Pharvis from entering the market, despite knowing that Pharvis’s generic drug did not infringe Daewoong’s patent. The KFTC also determined that Daewoong had enforced another patent that it had obtained on a fraudulent basis using deceptive data against another generic competitor, Ahn-Gook Pharmaceutical. The KFTC has also referred Daewoong to the Korean Prosecutor’s Office for criminal prosecution under the Patent Act.

Taiwan

While the TFTC has not often taken enforcement action involving the pharmaceutical industry, a notable case in 2021 involved fines imposed on two pharmaceutical companies. The TFTC imposed fines of NT$220 million on TTY Biopharm Co Ltd (TTY) and NT$65 million on Lotus Pharmaceutical Co Ltd (Lotus) for engaging in a concerted action in contravention of Taiwan’s Fair Trade Act.

TTY entered into an exclusive distribution arrangement with Lotus to sell its Furil capsules (colorectal cancer drugs) in Taiwan. TTY also sold its own brand of colorectal cancer drugs. Despite paying for the right to distribute Locus’ Furil capsules, TTY never sold any of Lotus’s products. The TFTC found that TTY had engaged in a concerted action by preventing the sale of Lotus’s Furil capsules through an exclusive distribution agreement.

It has been reported that TFTC also investigated a separate exclusive distribution arrangement entered into by TTY with Otsuka Pharmaceutical Co Ltd (Otsuka). This agreement also involved colorectal cancer drugs. The TFTC did not impose any fines in this case and concluded that there was a genuine distribution arrangement between the companies as TTY sold Otsuka’s products and paid Otsuka commissions in relation to sales volumes.

This case demonstrates that the TFTC will carefully consider the terms of pharmaceutical distribution agreements, as well as the factual circumstances and effects brought about by any such arrangements when enforcing the Fair Trade Act.

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