Thomas Cheng on Antitrust Issues in China's Pharmaceutical Sector (new book chapter)

"Antitrust Issues in the Pharmaceutical Sector in China"
Thomas Cheng
in Eleanor Fox et al (eds), Antitrust in Emerging and Developing Countries, Second Edition
2016, Concurrences Review, pp. 59-84

Introduction: Since the adoption of the Anti-Monopoly Law (“AML”) in 2007, a number of industries have received particular attention from the enforcement authorities from the People’s Republic of China (“PRC”). The most notable is probably the automotive industry, which has been subject to multiple enforcement actions. The PRC’s enforcement authorities are in the process of drafting specific guidelines for this sector. Other sectors which have been subject to the scrutiny of the enforcement authorities have included baby formula, contact lens, Chinese spirits, and telecommunications. One industry that has been noticeably absent from the news is pharmaceuticals. With the exception of one exclusive dealing/price fixing case and three abuse of administrative monopoly cases, the pharmaceutical industry has largely escaped the attention of the enforcement authorities. This is doubly surprising as the pharmaceutical industry has borne the brunt of much enforcement activity in other jurisdictions, such as the United States and the EU, in recent years. One reason that competition issues have not arisen in the industry thus far may be because drugs have been subject to direct price control by the Chinese authorities over the years. Therefore, the scope for using anticompetitive or exclusionary practices to raise prices was reduced. All this is about to change as the Chinese government recently lifted price control over a majority of drugs. The liberalization of drug prices may present pharmaceutical companies with the opportunity to raise their profits by way of anticompetitive practices. Moreover, the Chinese pharmaceutical market is set to grow in the future, as the Chinese population undergoes rapid aging and the middle class continues to grow. The ever-expanding middle class will be able to afford more expensive treatment, which will render the Chinese pharmaceutical market more lucrative. All this means that the hitherto lack of attention to the industry under the AML is set to change. Now would be a good time to take stock of the development of the industry, to examine how recent regulatory reforms will change the landscape, and to look ahead to possible future enforcement in the industry.