Lianhuan Pharmaceutical (SHA: 600513) faces a 61 million yuan ($8.4 million) antitrust penalty – equivalent to 72% of its 2024 net profit – for colluding with competitors to fix prices of dexamethasone phosphate API, a key COVID-19 treatment component. The Tianjin Market Regulatory Commission ordered the company to cease violations and imposed the fine following a price manipulation investigation.
The Pandemic Profiteering Scheme
Regulatory documents reveal a coordinated price-fixing operation among four pharmaceutical manufacturers during the health crisis:
- November 2021: Executives from Lianhuan, Tianjin Pharma, Xianju Pharma, and Xi’an Guokang Ruijin secretly agreed to raise prices
- December 2021: Xianju Pharma first implemented 14000 yuan/kg pricing (previously 7900-9000 yuan/kg)
- January 2022: All four companies simultaneously halted supplies to force market acceptance
- February 2022: Coordinated price hikes reached 38000 yuan/kg (282x original injection price)
The artificial shortage caused hospital procurement prices for dexamethasone injections to surge from 0.35 yuan to 98.76 yuan per dose during peak COVID treatment demand.
Financial Fallout and R&D Challenges
The penalty compounds existing financial pressures for Lianhuan:
- 2024 revenue: 2.16 billion yuan (-0.63% YoY)
- 2024 net profit: 84.16 million yuan (-37.66% YoY)
- Q1 2025: 18.78% revenue growth with 30% profit decline
While ramping up R&D spending from 66 million to 155 million yuan (2021-2024) to develop six innovative drugs, the company’s lead candidate LH-1801 faces stiff competition in the SGLT2 inhibitor diabetes market from established players including Boehringer Ingelheim, Eli Lilly, Hengrui Pharma, and AstraZeneca.
Strategic Crossroads
Lianhuan continues investing in subsidiaries despite investor skepticism, stating these moves align with long-term strategic goals. The company must now navigate:
- Regulatory scrutiny following antitrust violation
- Intensifying competition in core therapeutic areas
- Balancing innovation investments with profitability
This case highlights China’s strengthened antitrust enforcement in pharmaceuticals, particularly targeting pandemic-related market abuses. The penalty serves as warning to an industry where API price manipulation has drawn increasing regulatory attention since 2020.
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