East Bamboo Co., Ltd.

Case:

Key Words:

medical center, depression, medicine

Reference:

Fair Trade Commission Decision of March 21, 2012 (at the 1063rd Commissioners' Meeting)

Industry:

Drugs and Medicines Manufacturing (2002)

Relevant Laws:

Subparagraph 3 of Article 19 of the Fair Trade Law

Summary:

1. In 2008, 2009, and 2010, East Bamboo Co., Ltd. sold the 10mg Epram tablets to the medical institutions in the country at the average of 19.56 NT dollars (the same currency applies hereinafter), 17.49 dollars, and 14.91 dollars. However, in the second half of 2010, East Bamboo Co., Ltd. won the bid held by the Chang Gung Healthcare System with the offer of 1.3 dollars per tablet. Whether judging on the payment from the National Health Insurance for each 10mg Epram antidepressant tablet (25.6 dollars) or the production cost of the said medicine, 1.3 dollars was obviously incommensurable. Therefore, the low-price offer from East Bamboo Co., Ltd. was aimed at excluding other suppliers from competing was suspected of violating the Fair Trade Law.
2. Findings of the FTC after investigation:
   It showed that as a result of Hoan Pharmaceuticals' offer of 1 dollar per tablet, which was far lower than the purchasing cost and beat East Bamboo's bid, in 2008, East Bamboo Co., Ltd. lost the qualification to participate in subsequent procurement tenders held by most large hospitals in the country. Between 2008 and November 2010, East Bamboo Co. was only able to operate in the non-mainstream market that consists of small hospitals and clinics. Before East Bamboo took part in the medicine procurement tenders held by the hospitals under the Chang Gung Medical Foundation and St. Paul's Hospital in the second half of 2010, there was a huge market share difference between Hoan Pharmaceuticals' 10mg Lexapro film-coated tablets and East Bamboo's 10mg Epram tablets (the main ingredient of both being Escitalopram) in the domestic antidepressant market from 2008 to 2010. The advantages of the former included that Hoan's Lexapro tablets directly came from the manufacturer, and the quality, effect and the amount payable by patients for the medicine were all more competitive than Epram that had the same main ingredient but was under a generic name. It was no wonder that East Bamboo's Epram was unable to gain a fair share of the market. However, as East Bamboo Co. was still qualified to get business from other medical centers in the country, it reflected on Hoan Pharmaceuticals' earlier bid of NT$1 per tablet that was far lower than the purchasing cost and made the decision eventually that the company had to offer better trading terms to gain opportunities to compete in the medicine market.
3. The sales of the 10mg Epram tablets to the hospitals under the Chang Gung Medical Foundation and St. Paul's Hospital between January and September of 2011 not only meant the acquisition of East Bamboo Co. of the status as a medicine provider to a medical center and its eligibility to take part in competition in the domestic market for antidepressants using Escitalopram as the main ingredient, but also helped alleviate its risk of overkeeping the said medicine that had a limited shelf life as the ratio of its stock to purchases started to go down. The conduct of East Bamboo Co. was indeed able to increase its sales of the 10mg Epram tablets to pharmacies and logistics companies and thus to help boost its business income to compensate for the loss from selling to the aforementioned hospitals at unreasonably a low price. Based on the facts that the 10mg Epram tablets from East Bamboo Co. did not make up much of the antidepressant market share, the significance of the proof of capacity as a medicine supplier required by medical centers in the country, the reduction of the aforesaid medicine inventory risk, and the loss from the said sales practice did not increase the company's income from the sales of the 10mg Epram tablets, the FTC decided that the offer of NT$1.3 per tablet from East Bamboo Co. in the second half of 2010 to win the medicine procurement tender held by the Chang Gung Medical Foundation was not without economically rational justification or was aimed at excluding other businesses from competing in the medicine market. Therefore, the conduct did not violate Subparagraph 3, Article 19 of the Fair Trade Law.

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

Appendix:
East Bamboo Co., Ltd.'s Uniform Invoice Number: 22161606