The Pharmaceutical Sector

Anti-monopoly Guide of the Anti-monopoly and Anti-unfair Competition Commission of the State Council for the Pharmaceutical Sector
(Issued by the Anti-monopoly and Anti-unfair Competition Commission of the State Council on January 23, 2025)

Chapter I General Provisions

Article 1 Purpose and Basis
This Guide is developed in accordance with the Anti-monopoly Law of the People's Republic of China (“Anti-monopoly Law”) and other applicable laws for the purposes of preventing and curbing monopolistic acts in the pharmaceutical sector, directing undertakings to strengthen anti-monopoly compliance, maintaining the market order of fair competition in the pharmaceutical sector, encouraging innovation, and protecting consumer interests and public interest.
Article 2 Relevant Concepts
(1) “Pharmaceutical” means a substance for the prevention, treatment, or diagnosis of human diseases to effect the intended regulation of human physiological functions with the approved therapeutic indications or actions and indications, usage, and dosage, including but not limited to traditional Chinese medicines (TCMs), pharmaceutical chemicals, and biological products. For the purposes of this Guide, TCMs include TCM materials, TCM decoction pieces, TCM extracts, TCM formula granules, and Chinese patent medicines; pharmaceutical chemicals include chemical active pharmaceutical ingredients and chemical pharmaceutical preparations; and biological products include preventive biological products, therapeutic biological products, and diagnostic reagents managed as biological products.
(2) Chemical active pharmaceutical ingredients (“APIs”) means the raw materials that meet the requirements of laws and regulations governing pharmaceutical administration, are used for the production of various chemical pharmaceutical preparations, and are the active ingredients of chemical pharmaceutical preparations.
(3) Chemical pharmaceutical preparations means chemical pharmaceuticals that meet the requirements of laws and regulations governing pharmaceutical administration and are directly used for the prevention and treatment or diagnosis of human diseases.
(4) Pharmaceutical undertakings means natural persons, legal persons, and unincorporated organizations approved by relevant regulatory authorities to engage in pharmaceutical production and distribution. Agents within the territory of China designated by the holders of overseas pharmaceutical marketing authorization in accordance with the law and pharmaceutical research and development institutions engaging in business activities are deemed as pharmaceutical undertakings.
Article 3 Basic Principles
The anti-monopoly law enforcement body shall adhere to the following principles in carrying out anti-monopoly regulation and law enforcement in the pharmaceutical sector:
(1) Protecting fair market competition. Equal importance shall be attached to regulation and promotion of development, all kinds of pharmaceutical undertakings shall be treated equally, and efforts shall focus on preventing and curbing monopolistic acts in the pharmaceutical sector, so as to maintain the order of fair market competition.
(2) Safeguarding the interests of consumers. Various types of monopolistic acts in the pharmaceutical sector shall be severely cracked down on, pharmaceutical undertakings shall be propelled to engage in operations in compliance with laws and regulations, stable and effective supply of pharmaceuticals shall be ensured, the pharmaceutical use burden of consumers shall be reduced, the interests of consumers shall be safeguarded, and public welfare shall be improved.
(3) Stimulating vitality for innovative development. Pharmaceutical undertakings are supported in developing in an innovative manner, exercising intellectual property rights in accordance with the law, effectively regulating the abuse of intellectual property rights to exclude or restrict competition, and encouraging innovation in the research and development, technological improvement, and quality improvement of pharmaceuticals.
(4) Adhering to scientific and efficient regulation. The characteristics of the pharmaceutical sector and the law of market competition shall be thoroughly analyzed, competition analysis and legal argumentation shall be strengthened, advance, interim, and ex-post anti-monopoly regulation through the whole chain shall be strengthened, law enforcement shall be more targeted, scientific, and effective, and regulatory efficiency shall be constantly enhanced.
(5) Continuously strengthening legal deterrence. Anti-monopoly regulation and law enforcement in the pharmaceutical sector shall be strengthened and monopolistic acts that seriously damage fair market competition, damage consumer interests or public interest, or obstruct innovation and development shall be severely punished in accordance with the law, so as to promote the standardized and sound development of the pharmaceutical sector.
Article 4 General Provisions on Online Pharmaceutical Sales
Undertakings that engage in online pharmaceutical sales or provide online pharmaceutical trading platform services shall comply with the provisions of the Anti-monopoly Law and shall not engage in any monopolistic act by utilizing data and algorithms, technology, capital advantages, or platform rules, among others.
Article 5 Anti-monopoly Compliance
Pharmaceutical undertakings are encouraged and supported to strengthen anti-monopoly compliance, establish and improve anti-monopoly compliance management rules, effectively identify potential and actual anti-monopoly legal risks, and take corresponding prevention and disposal measures.
Industry associations in the pharmaceutical sector shall strengthen industry self-regulation and direct pharmaceutical undertakings to compete and engage in operations in compliance with laws through competition advocacy, compliance guidance, or other methods, so as to maintain a good market competition order.
Article 6 Definition of Relevant Markets
With respect to the definition of relevant commodity markets and relevant regional markets in the pharmaceutical sector, substitution analysis shall be conducted by following the fundamental basis and general principles for the definition of relevant markets, in light of characteristics of the pharmaceutical sector, and in consideration of technology, innovation, and other factors.
(1) Relevant commodity markets
In defining the relevant commodity market for pharmaceuticals, demand substitution analysis may be conducted by comprehensively considering the use or efficacy of pharmaceuticals (indications or main functions), price, therapy (medication route, and order of medication, among others), product characteristics, contraindications and adverse reactions, medication preferences of physicians and patients, regulation, medical insurance policies, and other factors. If the competition constraints generated by supply substitution are similar to those generated by demand substitution, supply substitution analysis may be conducted based on market access, production capacity, transformation of production facilities, technical barriers, and other factors at the same time.
In defining the relevant commodity markets for TCMs in an individual case, demand substitution analysis may also be conducted based on factors such as the source of medicinal materials, the quality of medicinal materials, brand recognition, and medication habits, and supply substitution analysis may be conducted based on factors such as patent protection, protection of trade secrets, TCM protection, and ethnic medicine culture.
In defining commodity markets for APIs in an individual case, since APIs play a special role in the production of chemical pharmaceutical preparations, a single API generally constitutes a separate market for related commodities and may be further subdivided according to specific circumstances. If there is a close substitution relationship among different types of APIs, it may be determined that multiple types of APIs constitute the same relevant commodity market according to specific circumstances.
In defining a commodity market related to pharmaceutical chemical preparations in an individual case, it may be determined that multiple closely substitutable chemical pharmaceutical preparations constitute the same market for relevant commodities based on use or efficacy and other factors. If a chemical pharmaceutical preparation is irreplaceable for a particular indication, it may be determined that such chemical pharmaceutical preparation constitutes a separate market for relevant commodities according to specific circumstances.
The pharmaceutical supply chain covers research and development, production and distribution, and other processes. The relevant commodity market may be defined in light of the stage where an undertaking is involved, as the case may be.
(2) Relevant geographic markets
In defining a relevant geographic market for pharmaceuticals, demand substitution or supply substitution analysis may be conducted based on relevant qualifications and regulatory standards for pharmaceutical production and distribution, as well as pharmaceutical transport, storage, and other factors.
Different countries or regions have different relevant qualifications and regulatory standards for pharmaceutical production and distribution. To engage in pharmaceutical production and distribution within the territory of China, pharmaceutical undertakings shall comply with the requirements of laws and regulations on market access, production quality, and distribution management, and the import of pharmaceuticals shall be subject to approval by the relevant regulatory authorities of China. Therefore, the relevant geographic market for pharmaceutical production and distribution is generally defined as the domestic market in China.
As the case may be, the relevant geographic market may be defined as the global market when the innovative business of pharmaceutical research and development is involved; or the relevant geographic market may be defined as a certain geographic scope within China when such processes as the retail and distribution of pharmaceuticals are involved.
Chapter II Monopoly Agreements
Article 7 Overall Analytical Framework
Chapter II of the Anti-monopoly Law and the Provisions on Prohibiting Monopoly Agreements shall apply to the determination of monopoly agreements in the pharmaceutical sector. In general, it is required to first determine whether relevant acts fall under the circumstances specified in Article 17 or paragraph 1 of Article 18 of the Anti-monopoly Law, and then analyze whether the undertaking can prove that the aforesaid acts meet the conditions for non-prohibition or exemption specified in the Anti-monopoly Law.
Article 8 Fixing or Changing the Prices of Pharmaceuticals
Any of the following agreements reached by competing pharmaceutical undertakings on fixing or changing the prices of pharmaceuticals generally constitutes a monopoly agreement prohibited by subparagraph 1 of Article 17 of the Anti-monopoly Law:
(1) Fixing or changing the ex-factory prices of pharmaceuticals, quotations to customers, the sale prices, purchase prices, and the range of price changes of pharmaceuticals, profitability or discounts, handling charges, and other expenses.
(2) Agreeing to adopt standard formulas, algorithms, or rules, among others, for calculating the prices of pharmaceuticals.
(3) Restricting the independent pricing power of pharmaceutical undertakings to the agreement, requiring joint pricing, and prohibiting independent price reductions, among others.
(4) Exchanging intention or information through third parties (such as upstream and downstream pharmaceutical undertakings or information platforms) and industry meetings, among others, so as to coordinate or act in concert on pharmaceutical prices.
(5) Fixing or changing the prices of pharmaceuticals by other means.
Article 9 Restricting the Quantity of Pharmaceuticals Produced or Sold
Any of the following agreements reached by competing pharmaceutical undertakings on restricting the quantity of pharmaceuticals produced or sold generally constitutes a monopoly agreement prohibited by subparagraph (2) of Article 17 of the Anti-monopoly Law:
(1) Restricting the quantity of pharmaceuticals produced by jointly restricting the output, fixed output, ceasing production, and other means or restricting the quantity of produced pharmaceuticals of specific varieties or specifications, or agreeing with competing undertakings on not to produce specific pharmaceuticals or restricting the quantity of specific pharmaceuticals produced by compensating competitive undertakings.
(2) Restricting the quantity of pharmaceuticals sold by such means as restricting the supply, restricting the quantity of sold pharmaceuticals of specific varieties or specifications, or reaching an agreement with competing undertakings on not to sell pharmaceuticals or restricting the quantity of pharmaceuticals sold.
(3) Restricting the quantity of produced or sold pharmaceuticals by other means.
Article 10 Dividing the Sales Market or Raw Material Procurement Market
Any of the following agreements reached by competing pharmaceutical undertakings on dividing the sales market or raw material procurement market generally constitutes a monopoly agreement prohibited by subparagraph (3) of Article 17 of the Anti-monopoly Law:
(1) Dividing the sales region, market shares, sales targets, sales revenue, sales profit, or types and quantity of pharmaceuticals sold and the time of sales.
(2) Dividing the procurement region, types, quantity, time, or suppliers of raw materials, auxiliary materials, packaging materials, containers, and other raw materials for the production of pharmaceuticals.
(3) Dividing the pharmaceutical sales markets or the procurement markets of medical raw materials by other means.
Article 11 Restricting the Purchase of New Technologies and New Equipment or Restricting the Development of New Technologies and New Pharmaceuticals
Any of the following agreements reached by competing pharmaceutical undertakings to restrict the purchase of new technologies or new equipment or restricting the development of new technologies or new pharmaceuticals generally constitutes a monopoly agreement prohibited by subparagraph (4) of Article 17 of the Anti-monopoly Law:
(1) Restricting the purchase, lease, or use of new technologies, new processes, or new equipment for the production of pharmaceuticals.
(2) Restricting investment in or the research and development of new pharmaceutical varieties, dosage forms, or uses, or new technologies, new processes, or new equipment for the production of pharmaceuticals.
(3) Restricting the purchase of new technologies or new equipment for the production of pharmaceuticals or restricting the development of new technologies or new pharmaceuticals by other means.
Article 12 Joint Boycott of a Transaction
Any of the following agreements reached by competing pharmaceutical undertakings to jointly boycott a transaction generally constitutes a monopoly agreement prohibited by subparagraph (5) of Article 17 of the Anti-Monopoly Law:
(1) Jointly refusing to supply or sell pharmaceuticals to a specific undertaking by delaying or suspending the transaction with such an undertaking or imposing restrictive conditions, among others.
(2) Jointly refusing to purchase or sell pharmaceuticals of a specific undertaking.
(3) Jointly requiring a specific undertaking not to trade with a competing pharmaceutical undertaking.
(4) Jointly boycotting trading by other means.
Article 13 Reverse Payment Agreements
There is an actual or potential competitive relationship between the patentee of a generic pharmaceutical and the applicant for a generic pharmaceutical. If the patentee of a generic pharmaceutical gives or undertakes to give direct or indirect benefit compensation to the applicant for the generic pharmaceutical without any justifiable reason, a reverse payment agreement in which the applicant for the generic pharmaceutical makes non-competition undertakings, such as not challenging the validity of the relevant patent right related to the generic pharmaceutical, delaying the access to the relevant market of the generic pharmaceutical, or not selling the generic pharmaceutical in specific regions, may constitute a monopoly agreement prohibited by Article 17 of the Anti-monopoly Law.
In analyzing whether a reverse payment agreement constitutes a monopoly agreement, the following factors may be considered:
(1) Whether the benefit compensation given or undertaken to be given by the patentee of the generic pharmaceutical to the applicant for the generic pharmaceutical evidently exceeds the cost of resolving the dispute over the patent of the generic pharmaceutical and no reasonable explanation can be made.
(2) Whether the agreement substantially extends the market exclusive time of the patentee of the generic pharmaceutical or obstructs or affects the entry of the generic pharmaceutical into the relevant market.
(3) Other factors that exclude or restrict competition in the relevant market.
Article 14 Fixing Resale Price and Setting Minimum Resale Price
Any of the following agreements on fixing resale price or setting the minimum resale price of a pharmaceutical concluded by a pharmaceutical undertaking and its transaction counterparty generally constitutes a monopoly agreement prohibited by subparagraphs (1) and (2), Article 18 of the Anti-monopoly Law:
(1) Fixing the price level or the range of price change, among others, or setting the minimum price level or the range of price change, among others, for the resale of the pharmaceutical to a third party by its transaction counterparty in such forms as written agreements, oral agreements, price adjustment letters, and price maintenance notices.
(2) Indirectly fixing the resale price of the pharmaceutical or setting the minimum resale price of the pharmaceutical by fixing or setting the profitability of the transaction counterparty, discounts, rebates, handling charges, or other fees.
(3) Fixing the resale price of the pharmaceutical or setting the minimum resale price of the pharmaceutical by other means.
A pharmaceutical undertaking that fixes the resale price or sets the minimum resale price may supervise and monitor the resale price by taking punitive measures such as reducing rebates or discounts, collecting liquidated damages or security deposit, refusing to supply goods, and rescinding the agreement, taking incentive measures such as offering rebates or discounts, giving priority to supply goods, and providing support, and force or force in disguise its transaction counterparty to fix the resale price, or by checking the sales records and invoices of its transaction counterparty, engaging a third party, relying on data and algorithms, or other means.
If any pharmaceutical undertaking and i......