Are APIs easy to be monopolized? What are the risks?
In the pharmaceutical industry, APIs (Active Pharmaceutical Ingredients) are the "core raw materials" of drug products, which determine the efficacy, safety and stability of drugs. Due to the important position of APIs in drug production, the public is extremely sensitive to their price changes and market order. In recent years, events such as "API monopoly", "speculation and price increase" and "supply chain disruption" have frequently appeared in the news, and even triggered antitrust investigations by the National Development and Reform Commission.
So, are APIs really easy to be monopolized? Once monopolized, what risks will it bring to the pharmaceutical industry, market and patients? ** This article will comprehensively analyze the monopoly phenomenon and potential risks in the field of APIs from the dimensions of industry structure, technical barriers, policy environment, typical cases, etc.
1. Are APIs easy to be monopolized?
1. Theoretically, APIs are "relatively easy" to form a monopoly. Compared with downstream finished drugs, API market competition is more likely to be compressed. The main reasons are: (1) High production concentration. APIs are capital-intensive and technology-intensive industries with complex processes, long construction cycles, and high compliance costs. Therefore, the number of companies with production capacity is relatively limited. There are often only 3 to 5 companies with large-scale production capacity for the same product, and 1 to 2 of them may control more than 90% of the market share. (2) High environmental protection and safety thresholds, easy to form an "exit mechanism". In recent years, the state has strengthened environmental protection and safety supervision, resulting in many small and medium-sized API factories to stop production and delist. This "passive exit" has accelerated industry concentration to some extent and brought "bargaining power" to a few surviving companies. (3) Patent and registration barriers are difficult to break. Some high-end API varieties involve core synthesis technology, patent protection or registration barriers, which makes it difficult for other companies to enter, further exacerbating the "market closedness". 2. In actual operation, there have also been obvious monopoly and manipulation behaviors
In the past few years, there have been many incidents of API monopoly in the Chinese market, such as:
The case of joint price manipulation of vitamin C API;
The collective price increase of suppliers of "levofloxacin hydrochloride";
Many market operations of "supply cut and then price increase".
These behaviors have caused downstream pharmaceutical companies to be unable to produce on time or their costs have increased dramatically, directly affecting the safety of patients' medication and price stability.
II. Typical manifestations of API monopoly
1. Price monopoly (joint price increase)
If there are only a few API companies in the market, in the absence of sufficient market supervision, they may drive up the price of raw materials through agreements, tacit understandings, and cooperative pricing.
For example: the price of an antibiotic API has increased from 200 yuan/kg to 2,000 yuan/kg, but the production cost has not changed significantly, and there is often a joint price increase behind it.
2. Capacity monopoly (supply control)
Companies deliberately limit production or stop production to create market shortages in order to achieve the purpose of artificially raising prices, especially when downstream pharmaceutical companies rely on a single API supplier.
3. Market blockade (access monopoly)
Some leading companies prevent new entrants from obtaining market access qualifications by mastering qualifications such as drug registration approval, GMP certification, DMF documents, CEP documents, etc., thus forming a de facto monopoly.
4. Technology monopoly (patents and processes)
In the field of high-end APIs (such as anti-cancer targeted drugs and biological APIs), some companies have patent protection or exclusive synthesis processes, which are difficult for new entrants to bypass, forming a technical monopoly.
Three, five major risks brought by API monopoly
1. Drug prices have risen sharply, harming the interests of patients
The rise in API prices directly leads to an increase in downstream finished drug prices. Even if the centralized procurement policy suppresses the terminal price, once the API price increase space exceeds the tolerance, the preparation companies will choose to withdraw or stop production, and eventually patients will have no drugs to use or have to pay higher prices.
2. The risk of drug supply interruption increases, endangering the safety of clinical drug use
Once the APIs of certain antibiotics, antihypertensive drugs, and anti-epileptic drugs are monopolized and the supply is interrupted, it will lead to a shortage of preparation drugs, affecting the clinical use of drugs in hospitals, and even endangering lives.
3. Hitting the survival ability of downstream pharmaceutical companies
The price fluctuations of raw materials caused by the monopoly of APIs have forced many generic pharmaceutical companies to withdraw from the market due to cost inversion. The phenomenon of winning drugs losing money and contracts being difficult to fulfill is frequent.
4. Damaging the industry ecology and technological innovation environment
The monopoly of APIs will cause the industry to form the phenomenon of "high thresholds and bad money driving out good money". Late entrants lack the motivation to invest in technological innovation, which will hinder the progress of the entire industry in the long run.
5. Triggering government supervision and international antitrust investigations
Some leading API companies also have monopolistic behaviors in the international market, triggering anti-dumping and anti-monopoly investigations by foreign governments, affecting the image and compliance risks of China's API exports.
IV. Supervision and rectification of API monopoly
1. Anti-monopoly law enforcement by the National Development and Reform Commission
In recent years, the state has strengthened anti-monopoly investigations in the field of APIs, and has issued tens of millions or even hundreds of millions of fines many times. For example:
A vitamin manufacturer was fined more than 1 billion yuan for market manipulation;
A cephalosporin API was included in the investigation list for "price gouging";
The National Development and Reform Commission has repeatedly stated that it will focus on combating the "malicious monopoly" and "speculative price increases" of APIs.
2. Promote centralized volume procurement to break the monopoly chain
Through centralized procurement organized at the national level, centralized procurement prices are transparent and bidding is open, forcing pharmaceutical companies to choose more raw material suppliers, indirectly breaking the monopoly structure and promoting open market competition.
3. Encourage "domestic substitution" and "multi-source supply" of APIs
The government encourages pharmaceutical companies to use multiple API suppliers ("one product, multiple sources"), promote domestic APIs to replace imported products, reduce dependence on a single supplier, and avoid forming a de facto monopoly.
4. Establish a monitoring and early warning system for API prices
Medical insurance bureaus and drug supervision departments in many places have established an early warning mechanism for API price fluctuations. Once a certain type of API price is found to be abnormal, they will intervene in time or organize special investigations.
5. How to deal with the risk of API monopoly?
For the government:
Strengthen anti-monopoly law enforcement in the industry, and focus on supervising the pricing behavior of leading companies;
Guide pharmaceutical companies to improve bargaining power and break the binding sales of APIs;
Promote the release of green and environmentally friendly production capacity and reduce the concentration of APIs;
Encourage independent development and local substitution of key APIs.
For pharmaceutical companies:
Actively layout the upstream supply chain and build a stable API resource;
Promote "one product, multiple sources" to improve the risk management ability of raw material procurement;
Self-build or participate in API companies to achieve industrial chain integration.
For API companies themselves:
Reduce dependence on monopoly and improve technological innovation capabilities;
Operate in compliance to avoid high fines for market manipulation;
Actively expand the international market, optimize customer structure, and guard against domestic policy risks.
VI. Future Outlook: Establish a healthier API ecosystem
As the "heart" of the pharmaceutical industry chain, APIs have irreplaceable significance for protecting public health due to their stable supply chain, reasonable prices, and transparent market. To achieve a truly healthy pharmaceutical ecology, we should start from the following aspects:
Strengthen the construction of competition mechanisms and limit administrative market barriers;
Strengthen the green environmental protection approval mechanism and release compliant production capacity;
Optimize the global supply chain layout and reduce "single point dependence";
Build an industry credit evaluation system and establish a blacklist for companies that maliciously manipulate the market.
VII. Conclusion: Under monopoly, we must guard against "hidden costs"
On the surface, the monopoly of raw materials is a profit-driven market behavior, but behind it is the "
