He An Co., Ltd.

Case:

Key Words:

medical center, depression, medicine

Reference:

Fair Trade Commission Decision of September 7, 2011 (the 1035th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100163

Industry:

Pharmaceutical Manufacturing (2002)

Relevant Laws:

Article 19(iii) of the Fair Trade Law

Summary:

1. The East Bamboo Company, Ltd. (hereinafter referred to as East Bamboo) is the exclusive sales agent of Epram tablets 10 mg. antidepressant medicine, and the He An Co., Ltd. (hereinafter referred to as He An) is the exclusive distributor of Lexapro tablets 10 mg. In September 2008 the East Bamboo Company received a bid notification from Chung-Ho Memorial Hospital of Kaohsiung Medical University, which it entered at a unit price of NT$9 per 10 mg. Epram tablet. However, upon subsequently learning that He An won the bid at a unit price of NT$1 per 10 mg. Lexapro tablet, East Bamboo contended that He An had excluded other vendors from competition through low pricing so as to monopolize the antidepressant medicine market, conduct that violated the terms of the Fair Trade Law.
2. Upon investigation the FTC found that medicine sold at medical centers, local hospitals, and large regional hospitals throughout the country normally require proof of use by other medical centers in order to participate in price bid procedures for hospital purchasing. That is to say, the first use of a given medicine by a medical center in the country is a vital threshold to sales opportunities to medical centers, local hospitals, and large regional hospitals to increase sales volume. If East Bamboo had successfully won the purchase bid for Chung-Ho Memorial Hospital of Kaohsiung Medical University on September 16, 2008, it would qualify for bidding on subsequent medicine purchases by other medical centers, local hospitals, and regional hospitals, placing considerable price competition pressure on He An.
3. Grounds for disposition:
   (1) Upon investigation the FTC found that Lexapro 10 mg. tablets and Epram 10 mg. tablets are covered by the National Health Insurance Plan. At the time of the incident under review, National Health Insurance paid NT$34.4 and 27.5 for Lexapro and Epram, respectively. Although identical in contents, Lexapro 10 mg. tablets are sold by the original manufacturer, and National Health Insurance pays NT$6.9 per tablet more than for the generic Epram 10 mg. tablets. If domestic medical institutions take the profit from the price difference (the difference between the National Health Insurance reimbursement price and actual purchase price) into consideration, then East Bamboo gave away product free of charge, and domestic medical institutions could earn a price differential of NT$27.5 per tablet, whilst as long as He An marketed the product for less than NT$6.9, domestic medical institutions could earn more than the NT$27.5 price differential.
   (2) In addition, He An's conduct excluded East bamboo from taking advantage of circumstances to obtain qualifications for taking part in purchase bids for most large hospitals. In addition to being excluded from the purchasing bid market for most large hospitals between 2008 and November 2010, East Bamboo was only able to access the small hospital and clinic non-mainstream market. Further, the Bureau of National Health Insurance of the Executive Yuan's National Health Administration lowered the reimbursement price per 10 mg. tablet of Epram from NT$27.5 to $25.6 on October 1, 2009, preventing East Bamboo from
   entering the National Health Insurance Plan medicine reimbursement market at the initial stage and gaining access to the market for the majority of large hospitals, severely damaging the sales turnover of Epram 10 mg. tablets and restricting East Bamboo from competing in the related medicine market.
   (3) Upon consideration of the motivations for He An's unlawful conduct and anticipated unfair profits, the damage to the trading order resulting from the unlawful conduct, and the ongoing duration of damage to the trading order from the unlawful conduct, the FTC ordered He An to cease the unlawful conduct described in the previous paragraph immediately and imposed a fine of NT$3 million.

Appendix:
He An Co., Ltd.'s Uniform Invoice Number: 04224381

Summarized by Chen Haw-Kae; Supervised by Lin Gin-Lan