Draft anti-monopoly guidelines in the pharma sector released by China SAMR

On 9 August 2024, China’s State Administration for Market Regulation (SAMR) released a draft of the Antimonopoly Guidelines in the Field of Pharmaceuticals for public comments. These Guidelines are designed to provide clearer guidance on antitrust enforcement and compliance for operators across the entire pharmaceutical industry.

Key elements of the Guidelines

1. Expanded scope of application

The Guidelines expand and refine the scope of antitrust regulation within the pharmaceutical sector, building on the Anti-monopoly Law of the People's Republic of China (AML) and the previously issued Antitrust Guidelines for Active Pharmaceutical Ingredients (Antitrust Guidelines APIs). The Guidelines apply broadly to all pharmaceutical products, including chemical drugs, biological products and traditional Chinese medicines. Upon the implementation of the Guidelines, the Antitrust Guidelines for APIs will be repealed, positioning the new Guidelines as a critical reference for antimonopoly practices and enforcement in the pharmaceutical industry.

2. Monopoly agreement

The Guidelines list typical monopolistic conduct within the framework of the AML, including fixing or changing drug prices, dividing sales or the raw material procurement market, limiting the sales area of distributors, etc. Notably, specific to the pharmaceutical industry, the Guidelines address the considerations for antitrust review of reverse payment agreements in the context of generic medicines, specifically where the patent holder of the original drug, without legitimate reason, offers or promises direct or indirect benefits to the generic drug applicant in exchange for non-challenge of the patent’s validity, delayed market entry, or non-sale of the generic drug in specific regions. Additionally, given the unique public welfare nature of the pharmaceutical industry, the Guidelines provide specific considerations for exemptions that may apply.

3. Abuse of market dominance

The Guidelines refine the criteria for determining market dominance, taking into account factors such as an operator's control over the pharmaceutical supply chain. The Guidelines list typical forms of market dominance abuse in the pharmaceutical sector, including unfair high pricing, refusal to deal, exclusive dealing, tying, imposing other unreasonable trading conditions, and discriminatory treatment. Notably, the Guidelines identify product switching as a form of market dominance abuse. (Product switching involves redesigning an existing patented drug to obtain new patent rights and implementing measures such as halting sales or repurchasing to transition from the original patented drug to the new patented drug).

4. Concentration of operators

The Guidelines clarify that the State Council's Anti-monopoly Enforcement Administration may require operators to submit declarations if certain concentrations, even those not meeting the standard criteria, potentially exclude or restrict competition. Moreover, the Guidelines recognise that intellectual property licensing transactions could constitute a concentration of operators, potentially affecting the licence-in/licence-out transaction model within the pharmaceutical industry.

Lastly, the Guidelines provide information on fair competition reviews by administrative authorities and the prevention of abuse of administrative power to exclude or restrict competition in the pharmaceutical sector.

The Guidelines are open for public consultation until 23 August 2024 and are expected to be finalised and implemented soon after.

Law-Now will continue monitoring the implementation of the Guidelines and provide more detailed analysis on the sections with the greatest impact on multinational pharmaceutical companies. Stay tuned.

The original publication can be found here (Chinese only).

For more information on the Guidelines, contact your CMS client partner or these CMS experts.