Collusion in Pharmaceutical Industry will Lead to Burden on Patients

Bid rigging for pharmaceuticals is a malicious act that could lead to an increase in the burden on patients. The entire industry must take it seriously and work to prevent its reoccurrence.

In a bid-rigging case over orders for pharmaceuticals placed by the Japan Community Health Care Organization, an independent administrative institution that operates 57 hospitals nationwide, the special investigation squad of the Tokyo District Public Prosecutors Office has indicted three major pharmaceutical wholesalers on suspicion of violating the Antimonopoly Law for unjustly restricting business. The prosecutors also indicted seven people involved in the bid rigging without making arrests.

Another company, believed to have been the first to voluntarily report the violation, was not indicted, but all four companies involved have a combined market share of 80%. The industry’s top four companies hold grave responsibilities for taking part in the wrongdoing together.

The organization has been placing bulk orders for pharmaceuticals to be used at the 57 hospitals. In 2016 and 2018, the companies decided in advance on the percentage of orders they would receive and the bidding prices. The total amount of the contracts was about ¥140 billion, and each company was allocated 20% to 30% of them.

The winning bids are said to have reached around 99% of the ceiling prices. The special investigation squad believes that the companies tried to make a profit by raising the prices of the contracts. It is hoped that the trial will reveal the whole picture of the bid rigging.

In this case, it has also been pointed out that the system in which the organization ordered a large number of pharmaceuticals in bulk became a hotbed of wrongdoing. This is because the four major companies were effectively the only ones able to deliver pharmaceuticals to those hospitals across Japan.

Was there any laxity in the way the organization placed orders and set ceiling prices? The ordering side is urged to be more cost-conscious.

The government’s official prices for pharmaceutical drugs that doctors prescribe are determined based on such factors as the market prices at which wholesalers deliver to hospitals. If the market price remains high due to collusion, the official prices will not be lowered, and as a result, patients will have to pay more than necessary for their medical treatment.

It is no wonder that the Fair Trade Commission, which filed complaints against the three companies, made a harsh assessment, saying, “It is malicious because it could affect the people who pay health insurance premiums as well as those who will pay in the future.”

In 2003, 10 companies in the pharmaceutical wholesaling industry were ordered by the FTC to pay punitive surcharges totaling more than ¥500 million, on the grounds that they had entered into a cartel to limit the rate of discounts on sales.

The industry has been undergoing mergers and consolidations, and many of the 10 companies at the time of that scandal have been consolidated into the four companies involved in the latest bid rigging. Couldn’t they have taken steps to break bad practices in the process of realignment?

The costs of medical care, including pharmaceutical costs, continue to expand as the population ages. The pharmaceutical wholesaling industry needs to keep in mind that bid rigging may hinder control of medical costs.

— The original Japanese article appeared in The Yomiuri Shimbun on Dec. 13, 2020.