Pharma Remains An Enforcement Focus In China – SAMR Orders Unwinding Of A Completed Pharma Deal

Recent years have seen regulator focus on the pharmaceutical sector in China intensify and enforcement has become a key priority. A recent decision by the China's State Administration for Market Regulation (SAMR) - which, due to competition concerns, orders the unwinding of a completed transaction in the sector - exemplifies this growing trend.

SAMR's prohibition decision

The transaction in question was Wuhan Yongtong Pharmaceutical's (YT Pharma) acquisition of Shandong PKU High Tech Huatai Pharmaceutical (HT Pharma) which completed in 2019 (the Acquisition). YT Pharma is active in the supply of pharmaceutical products, including the papaverine hydrochloride active pharmaceutical ingredient (the API), while HT Pharma produces papaverine hydrochloride injections, a downstream product of the API.

SAMR concluded that the Acquisition (which had created a vertically integrated business) had the effect of excluding or restricting competition in the downstream market. This was based on a review which found the following:

• Control over essential raw materials and market power: YT Pharma had gained control over the API (a critical raw material) having signed an exclusive distribution agreement with a separate supplier in 2016 and became the only market source for the API in 2018, holding a dominant position
• Motivation and actual effects of restricting competition:
  • Leveraging YT Pharma's control over the API, HT Pharma's share in the downstream injection market rose sharply following the Acquisition;
  • After YT Pharma became the exclusive distributor of the API, the price surged. This was followed by a sharp increase in the price of the downstream injection product.

On 23 July 2025, SAMR issued a prohibition decision which, amongst other commitments, included what is effectively a complete unwinding of the transaction. The decision requires YT Pharma (and its controlling shareholder, Mr. Guo) to transfer their indirectly held shares in HT Pharma to an unaffiliated by third party by 22 January 2026. This is SAMR's first unwinding order of a completed transaction (for full details of the case, please see our Competition Notes blog here).

Increased regulator focus and enforcement in China's pharmaceutical sector

These developments are part of a broader trend which sees the pharmaceutical sector subject to heightened scrutiny in China. Since the Anti-Monopoly Guidelines for the Pharmaceutical Sector came into effect in January 2025, SAMR has issued multiple penalties targeting different stages of the supply chain.

For example, in May and June 2025, the Tianjin Administration for Market Regulation (Tianjin AMR) imposed penalties totalling approximately RMB 350 million (approximately USD 50m) on four manufacturers of dexamethasone sodium phosphate (DSP) APIs and their senior executives for participating in a horizontal monopoly agreement, representing the second instance in which Chinese competition authorities have applied dual liability, holding both enterprises and responsible individual executives accountable. In addition, an individual business operator, identified as the key organizer of this price-fixing cartel, was fined RMB 5 million (approximately USD 700,000), representing the largest known antitrust fine ever imposed on an individual in China.

Other notable recent enforcement actions are summarised in the table below:

Other recent developments in China highlight the broader regulator sensitivity that surrounds the sector. For example, at the end of 2024, 42 pharma companies were on China's National Healthcare Security Administration's Procurement Non-Compliance List with over 50% of the violations relating to bribery. In one case, 6 pharma companies who were found to have colluded in China's drug procurement process were subject to government forfeitures totalling around USD $37 million and criminal investigations were launched against the individuals involved. Meanwhile, in January 2025, China's Central Commission for Discipline Inspection designated combating healthcare sector corruption and medical insurance fraud as a key priority, pledging to "punish corruption relentlessly". For more details please see our recent Global Corporate Crime and Investigations update.

Companies in the sector operating in China should be aware of the increased scrutiny and enforcement focus being demonstrated by China's regulators. Keeping up to date with developments and ensuring the implementation of effective compliance and risk management programmes remains key.