① On the evening of this day, Shanghai Pharmaceutical made a sudden announcement. The subsidiary Yicheng Chemical recently received an administrative penalty decision from the Shanghai Municipal Supervision Bureau due to “misuse of its dominant position in the market, and was fined a total of 462 million yuan. The forfeiture amount is close to 10% of Shanghai Pharmaceutical's net profit last year; ② Shanghai Pharmaceutical admits that it will have a certain negative impact on the company's current financial statements, and the industry believes that it will have a certain negative impact on the company's exclusive varieties and API companies.
Financial News Agency, December 17 (Reporter Lu Afeng) On the evening of this day, Shanghai Pharmaceutical (601607.SH), which has been in an “troubled autumn” in recent times, announced that the subsidiary Shanghai Shangyao First Biochemical Pharmaceutical Co., Ltd. recently received an administrative penalty decision from the Shanghai Municipal Supervision Bureau for “misuse of its dominant position in the market, unfair and expensive conduct,” and confiscated illegal proceeds and fines totaling 462 million yuan. The forfeiture amount was close to 10% of Shanghai Pharmaceutical's net profit last year. Shanghai Pharmaceutical also admits that it will have a certain negative impact on the company's current financial statements.
Industry experts told the Financial Services Association reporter that because of the high price monopoly involved, the investigation process and evidence collection time for the relevant departments was relatively long, so only after the enterprise took the initiative to cut prices could there be administrative penalties that have passed so long after the enterprise took the initiative to cut prices. With relevant departments paying close attention to drug prices and sales expenses, there is no room for “luck” for relevant enterprises. In particular, some companies with exclusive varieties and APIs must not act as “ostriches,” and “deformed” profits are not conducive to the sustainable development of enterprises.
On the evening of the 17th, Shanghai Pharmaceutical made an emergency announcement. Recently, Shanghai Shangyao First Biochemical Pharmaceutical Co., Ltd. (hereinafter referred to as “Lifetime Chemical”), a wholly-owned subsidiary of the company, received an administrative penalty decision issued by the Shanghai Municipal Supervision Bureau.
The Shanghai Municipal Supervision Bureau believes that the systematic implementation of the act of selling injectable polymyxin B sulfate at unfairly high prices violates the relevant provisions of the Anti-Monopoly Law and constitutes an act of misuse of a dominant position in the market and unfairly high prices. The Shanghai Municipal Supervision Bureau decided to order the cessation of illegal acts, confiscate 338 million yuan of illegal proceeds, and impose a 3% fine of 2022 sales, totaling 124 million yuan.
According to public information, polymyxin B sulfate for injection is the exclusive biochemical variety of Shanghai-based medicine. Clinically, it is mainly used to fight gram-negative bacilli, mainly infections caused by Pseudomonas aeruginosa.
According to Shanghai Pharmaceutical's financial report, injectable polymyxin B sulfate was listed in 2019, and the market was in a period of deepening market in 2021. Sales in 2021 increased 60.53% year on year.
In 2021, hospitals purchased 540,000 bottles of this drug, with a price range of 2120 yuan to 3,100 yuan. Even at the lowest price of 2120 yuan, sales of this drug in hospital terminals had already exceeded 1,145 billion yuan in that year.
In 2022, sales of injectable polymyxin B sulfate increased further. The total actual purchase volume of hospitals reached 716,000 bottles, the winning bid price was uniformly 2,303 yuan, and terminal sales increased to 1,649 billion yuan.
Shanghai Pharmaceutical also responded to the impact of this incident on the company in its announcement. It claims that the aforementioned forfeiture amount accounted for 0.199% and 8.226% of the audited operating income and net profit attributable to shareholders of listed companies for the most recent fiscal year covered by the company's consolidated statements, respectively. It will have a negative impact on the company's current financial statements, but the overall impact is limited.
In fact, this matter is not without warning. In July, several provinces voluntarily applied for price adjustments for injectable polymyxin sulphate, and adjusted the online price of injectable polymyxin sulphate B from 2,303 yuan to 270 yuan. A reporter from the Financial Association paid exclusive attention and reported on it. For details, see “Major Price Cuts for Reproduction Drugs! The “one-off” bargaining space for Shanghai Pharmaceutical's 1.6 billion major single products sparks buzz in the industry”.
At the time, Shanghai Pharmaceutical exclusively responded to the Financial News Agency reporter saying that in response to requests from relevant departments, the company's biochemical company actively fully communicates and coordinates with partners. At the same time, taking into account the special nature of the drug's use, it finally submitted a price reduction application after internal estimates. This single product had no significant impact on the Group's profit contribution in 2022.
Why is it that almost half a year has passed since the incident has passed, and now we have received an administrative penalty decision?
Lu Chuanyong, general manager of Wuhan Harry Pharmaceutical, told the Financial Services Association reporter that generally speaking, cases involving monopoly in the pharmaceutical industry require factual determination, fixed collection of evidence, and even Shanghai Pharmaceutical may have to file counterclaims, and the investigation process by relevant departments is generally relatively lengthy. “In terms of the amount and impact of this case, it really isn't too long between them.”
“The high prices caused by the monopoly have not only increased the burden on the public, but also increased health insurance spending. In the current climate where people pay great attention to drug prices, there is almost no room for 'luck' in this kind of 'cat fatigue'.” Lu Chuanyong advised that companies that have exclusive varieties or APIs and are in an “dominant position” in the market should examine themselves more. Sustainable and healthy development is far better than “exploiting policy gaps.”
In fact, Shanghai Pharmaceutical is in the midst of an “troubled season.” Not only has it been administratively punished today, but over the past three months, six managers have already been investigated. According to Tianyan Research, Shanghai Pharmaceutical holds 100% of the shares in Biochemical and 100% of the shares in Shanghai Shangke Pharmaceutical Co., Ltd.