In contemporary society, the three mountains that weigh on the Chinese people have been replaced by education, housing and medicine, of which education and housing have been rejected by young people lying flat, but medicine has left us with no choice. In order to cope with these social problems, the state has successively implemented measures such as "education to reduce burdens", "housing and housing without speculation" and "medical insurance collection", and strive to improve people's livelihood and safeguard the rights and interests of the general public. In terms of medicine, after the implementation of the policy, the original low-cost and efficient commonly used drugs and life-saving drugs have appeared the abnormal phenomenon of "price reduction is death", either the price has continued to rise, or the supply shortage or even disappeared. There must be demons when things go wrong, and the abnormalities of commonly used drugs, in addition to environmental protection and other factors causing the price of APIs to rise, more reasons are concentrated on artificial monopolies.
Under the capital game
It is ordinary people who suffer
"Batrae enzyme injection" is a life-saving drug for acute cerebral infarction and the only drug irreplaceable for the disease, and Beijing Tobisi Pharmaceutical Co., Ltd. is the only pharmaceutical company in China that can produce Batrox injection. But why was Simcere Pharmaceuticals and not Tobhi punished? There is also a story of the capital game behind this. Simcere Pharmaceutical has been planning for batrae enzyme injection for a long time, but due to the huge investment in self-research, it is more willing to achieve output by acquiring the only domestic manufacturer.
Simcere Pharmaceuticals has repeatedly thrown an olive branch to Tobsi, but Tobhi has been resistant to the acquisition. Since the manufacturer of batrae enzyme APIs in the world only has DSM Pentapharm in Switzerland, Simcere Pharmaceuticals has taken a salary from the bottom of the pot, obtained the exclusive agent of batrae enzyme APIs in China through several times higher than the market price and refused to sell APIs to Tobisi, resulting in Tobisi stopping production in 2020. Under the capital game, the suspension of life-saving drugs is ultimately hurt by patients waiting for life-saving.
In the end, Simcere Pharmaceutical's monopolistic behavior was reported to the State Administration for Market Regulation. In the face of the report, Simcere Pharmaceutical argued that the reason for refusing to sell APIs to Tobsi was that it needed APIs for self-development and did not have enough inventory. The investigation of the State Administration of Market Regulation shows that the amount required for Simcere Pharmaceutical's self-research is only 0.8203 liters, and its inventory not only meets the demand for self-research, but also does not affect external sales at all. Simcere Pharmaceuticals has also made it clear that it will achieve the purpose of acquiring Tobisi Pharmaceuticals by monopolizing the supply of RAW Materials as chips. The market supply of batraease injection seriously affected the treatment of related diseases, and the State Administration of Market Supervision fined Simcere Pharmaceutical 2% of its sales, that is, 100.7 million (Figure 1).
Figure 1 The State Administration for Market Regulation issued the Administrative Penalty Decision of Simcere Pharmaceutical (Source: The official website of the Anti-Monopoly Bureau of the State Administration for Market Regulation)
Although the matter is over, Simcere Pharmaceutical's acquisition of Tobisi Pharmaceutical is imperative. On February 22, 2022, Simcere Pharmaceutical issued an announcement of success in the arbitration, and 100% of the equity of Tobisi Pharmaceutical was transferred to Simcere Pharmaceutical (Figure 2). The acquisition dispute ended with the complete victory of Simcere Pharmaceutical, from raw materials to production, and finally achieved a complete monopoly on this life-saving drug.
Figure 2 Simcere Pharmaceutical announces successful arbitration (Source: Simcere Pharmaceutical's official website)
Monopolizing the people's "life-saving medicine"
Anti-monopoly law enforcement strikes hard
The problem of inflated drug prices has always been criticized by the public, a small cold in the past by buying a dozen dollars of cheap drugs can be solved, but now thousands of medical expenses have become the norm. Cheap drugs with good efficacy are difficult to find in large hospitals, while high-priced drugs dominate the market. For a long time, due to the abnormally high price of drugs, the current situation of looking down on the disease and not being able to afford to eat medicine has long become a headache for many patients. In particular, medicine is not divided, medicine is used to maintain medicine, and many agents and wholesalers increase and deduct layer by layer, resulting in drug prices like a kite that has gone off the line, and these "sky-high prices" will eventually have to be paid by patients at the consumer terminal. It not only seriously infringes on the interests of patients, but also promotes the atmosphere of social corruption.
In November 2018, the state launched the "4+ 7" drug collection pilot work, implemented a new policy of drug price reduction, and targeted the people's "expensive medical treatment" disease. Although the price reduction and variety of drugs brought about by the new drug price reduction policy in recent years are unprecedented, it still makes people feel uneasy about the phenomenon of "price reduction and death" of drugs. Some cheap and commonly used drugs and "life-saving drugs" with no substitutes are often in short supply for various reasons, such as cardiac surgery "protamine", rescue drug "Sidilland injection" for the treatment of heart failure, "actinomycin D" for the treatment of children's tumors, and "batroxen injection", a life-saving drug for acute cerebral infarction. A sample survey of the clinical use of more than 40 tertiary hospitals in 12 cities across the country showed that there are more than 500 kinds of basic drugs supplemented by the state and localities, and the shortage has reached 342.
To sort out the anomalies of commonly used medicines, it is necessary to understand the structure of the pharmaceutical industry chain. The pharmaceutical industry has more and more complex industrial chains, and its sub-industries are also more numerous. The raw material enterprises in the upstream of the industrial chain mainly produce raw materials, Chinese herbal medicines and biological raw materials for chemical drugs; the pharmaceutical enterprises in the middle reaches mainly produce chemical RAW Materials, chemical preparations, traditional Chinese medicines and biological biochemical drugs, etc.; then the drugs reach distributors and end-customer platforms through circulation channels, and finally face the drug group (Figure 3).
Figure 3 Structure of pharmaceutical industry chain (Source: Prospective Industry Research Institute)
APIs upstream of the industry chain have a significant impact on the entire pharmaceutical industry. An active ingredient is any substance or mixture of substances used in the manufacture of a pharmaceutical product that, when pharmaceutical, becomes an active ingredient in the drug. Such substances have pharmacological activity or other direct effects in the diagnosis, treatment, symptomatic relief, treatment or prevention of diseases, or can affect the function or structure of the body.
The sales volume of API products can be divided into three different periods according to the difference in the patent period of downstream preparations, which means that different APIs are divided into three categories: bulk, characteristic and patented APIs (Figure 4).
Figure 4 Classification and specific characteristics of API sub-industry (Source: China Merchants Bank Research Institute)
The rapid development of the basic chemical industry in the mainland, as well as the advantages of labor costs in the early stage of development, have made the mainland the world's largest producer and exporter of bulk APIs. 30% of the world's antibiotic APIs are supplied by the mainland, and hyaluronic acid APIs account for more than 70% of the global market. Among the vitamin APIs, except for a very few varieties, most of the output ranks among the top in the world [1]. According to the public information of the National Development and Reform Commission, there are 1500 kinds of RAW Materials in the mainland, of which only 1 of the 50 APIs can be produced by 1 enterprise that has obtained approval qualifications, only 2 enterprises can produce 44 APIs, and only 3 enterprises can produce 40 APIs, and the concentration of API manufacturers is relatively high. After a long period of market competition, the pattern has basically been determined, showing a pattern of oligarchic competition. However, the oligopolistic competition pattern often brings monopoly, and monopoly will affect the normal play of market price signals, fair competition between industry enterprises, consumer interests and economic operation efficiency and scientific and technological progress.
Behind the price increase or shortage of commonly used drugs, cheap drugs and even life-saving drugs, in addition to the increase in the price of APIs caused by environmental protection and other factors, more reasons are concentrated on artificial monopolies. As the upstream of the vast majority of drug production, the shortage or soaring price of APIs often leads to a series of chain reactions of supply interruption or suspension of production in downstream pharmaceutical companies, which eventually evolves into a livelihood problem that harms patients (Table 1). Therefore, the API industry has always been an area of focus for mainland anti-monopoly law enforcement agencies. In the face of the high prices and unreasonable phenomena of commonly used drugs caused by the monopoly of the pharmaceutical industry, the Anti-Monopoly Bureau of the State Administration for Market Supervision and Administration did not tolerate it and struck hard.
Table 1 Past price increases of some APIs
Source: Public Judgment Documents | Tabulation: Bio Exploration Editorial Team
According to the administrative penalty cases disclosed in the field of APIs, since the first API monopoly case in 2011, the Anti-Monopoly Law Enforcement Agency has closed 16 API monopoly cases and punished 28 enterprises. Taking the law enforcement situation in the past two years as an example (Table 2), since 2021, the administrative penalties for 5 API monopoly cases have been announced, and the number of cases has reached the highest in previous years; at the same time, the punishment has also been significantly upgraded, for example, in the calcium gluconate API case in 2020, the fine ratio of one of the three enterprises involved in the case reached 10% of annual sales, which is the first top fine case made by the anti-monopoly law enforcement agency.
Table 2 Anti-monopoly law enforcement cases of APIs in the past two years
Source: Anti-Monopoly Bureau of the State Administration for Market Regulation | Tabulation: Bio Exploration Editorial Team
There are already 6 batches of medical insurance collection
How much "moisture" is extruded?
In November 2018, the state launched the medical insurance collection, and the public is still in a state of half-understanding of the collection policy. In November 2020, the state organized the centralized procurement of high-value medical consumables to start the "first battle", and the average price of the selected coronary stents in the collection fell from 13,000 yuan to about 700 yuan, a drop of 93% (Table 3). The sharp price reduction of heart stents has made the public exclaim the "high moisture" of medical consumables. Today, the collection of medical insurance has completed six batches, which has also brought about a sharp reduction in the price of pharmaceutical products, which has benefited the people a lot (Table 4). The price reduction of more than 90% also reveals that the moisture of pharmaceutical products is much higher than that of other products.
Table 3 Results of the national cardiac stent collection
Source: National Health Insurance Bureau | Tabulation: Bio Exploration Editorial Team
Table 4 Results of national drug collection
Source: National Health Insurance Bureau | Tabulation: Bio Exploration Editorial Team
1
Why should the state carry out volume procurement?
The person in charge of the National Medical Insurance Bureau said: "Everyone is very concerned about the results and impact of each collection, but only by understanding the original intention of the state to carry out centralized procurement can we better understand this reform." Volume procurement is an international practice, aiming to achieve value for money and improve the efficiency of the use of procurement funds. These include two core mechanisms: one is to strengthen competition by increasing the scale of procurement, so as to achieve price reductions, and the other is to share procurement costs through centralized procurement. Originally, when decentralized procurement, each procurement entity had to organize bidding, and the cost of enterprise participation in procurement was relatively high, and the centralized procurement method reduced the recruitment cost and management cost of the government and enterprises.
To carry out state-organized procurement, the first is to implement the decision-making and deployment of the Party Central Committee and the State Council. In May 2019, the eighth meeting of the Central Committee for Comprehensively Deepening Reform deliberated and adopted the "Reform Plan for The Governance of High-value Medical Consumables", which requires the exploration of classified centralized procurement of high-value medical consumables in accordance with the principles of quantity procurement, volume and price linkage, and promotion of market competition. The second is to purify the circulation environment. Through centralized procurement, the unreasonable moisture in the circulation link is squeezed out, and the price of medical consumables returns to a reasonable level. At the same time, through the prepayment policy of medical insurance funds, medical institutions and enterprises are urged to settle the payment in a timely manner, reduce the financial costs of enterprises, and improve the price formation mechanism of medical services. The third is to deepen the reform of centralized procurement of medicines. The centralized procurement of drugs has achieved remarkable results, and this collection conforms to the voice of the society and expands the experience of centralized procurement of drugs to the field of high-value medical consumables. ”
2
What is the basis for the selection decision?
The person in charge of the National Medical Insurance Bureau said: "The effectiveness of collection depends on the competitiveness of the product, which depends on the replaceability of the product, and the replaceability depends on the homogeneity of the product, the higher the homogeneity, the higher the replaceability and competitiveness, and the more suitable it is for collection." On the basis of listening to opinions and in-depth research, we have preliminarily proposed 4 selection criteria. First, the market scale is large and the cost is high; second, the degree of inflated prices is relatively serious; third, the degree of product standardization is high and stable; fourth, the industrial development is relatively mature. ”
3
How to crack the impact of enterprise profits on the impact of collection and compression?
The person in charge of the National Medical Insurance Bureau said: "Taking cardiac stents as an example, before the collection, the domestic price of coronary stents is significantly higher than the international price level, and the 'gold sales' in the process of product promotion are an important reason for pushing up prices." In fact, in the past, stent products were sold at high prices, but companies did not get such high profits, and most of the revenue was used in the sales process. National gathering is to squeeze out the inflated moisture of 'sales with gold' through 'quantity procurement'. After purifying the circulation link, the willingness of enterprises to innovate is strengthened rather than weakened. This has been reflected in the collection of drugs, and several leading enterprises have significantly increased their investment in research and development since last year.
After the collection, the ability of enterprises to innovate has not weakened. According to the results of the analysis of the financial statements of domestic enterprises, international comparative prices and financial costs in the previous survey, the lowest price of collection and mining is still higher than its cost, and the collection and mining can expand market sales, and the enterprise still has normal profits. More importantly, after the reshaping of the entire industry ecology, everyone has clearer expectations for the future and is more determined to invest in research and development and innovation activities. As we have always believed, innovation is forced out, and innovation is market competition, not protection. ”[2]
In the past three years, the state has organized the collection of drugs and consumables with large clinical dosage and inflated prices to carry out accurate "targeted therapy", solving the problems of difficult and expensive medication for patients, and also producing a positive "catfish effect" on the development of the pharmaceutical industry. The price reduction space realized by the collection will free up the "old cage" for improving the sunshine income of medical staff and reducing the medical expenses of the people, and remove the "root cause" of "using medicine to support medicine" in the past.
Source: Jones Day, for academic exchange purposes only.
Written | essay competition
Typography | essay competition
End
Resources:
[1] Apis of biomedicine - characteristic APIs ushered in development opportunities, and the opportunities for bank intervention were highlighted
http://www.cnpharm.com/upload/resources/file/2021/08/10/96359.pdf
[2] National Medical Insurance Bureau: Cardiac stent collection and procurement saved 11.7 billion yuan, and the next step will be orderly promoted
https://finance.sina.com.cn/china/gncj/2020-12-11/doc-iiznctke5968802.shtml
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