On July 23, 2025, China's State Administration for Market Regulation (SAMR) issued a decision prohibiting Wuhan Yongtong Pharmaceutical Co., Ltd. ("Wuhan Yongtong") from acquiring equity in Shandong Beida Gaoke Huatai Pharmaceutical Co., Ltd. ("Shandong Huatai"). This marks the fourth case of a prohibited concentration of undertakings under China's Anti-Monopoly Law since its implementation in 2008, and the first such prohibition in the pharmaceutical sector.

The acquirer, Wuhan Yongtong, is a pharmaceutical distribution company, while the target, Shandong Huatai, is a drug manufacturer whose key product includes papaverine hydrochloride injections. In 2016, Wuhan Yongtong signed a distribution agreement for papaverine hydrochloride API with Qinghai Pharmaceutical Factory, designating Wuhan Yongtong as the exclusive distributor for Qinghai Pharmaceutical Factory's papaverine hydrochloride API across China. Without Wuhan Yongtong's consent, Qinghai Pharmaceutical Factory was prohibited from selling the API to any third party, with a contract term of 15 years.

In November 2018, Wuhan Yongtong signed an equity transfer agreement with a third party to acquire a 50% stake in Shandong Huatai. Through this transaction, Wuhan Yongtong gained control over Shandong Huatai. The equity transfer was completed in 2019.

Following an investigation, the antitrust regulatory authority found that around 2018, aside from one other self-producing and self-using enterprise, Wuhan Yongtong was the sole supplier of papaverine hydrochloride API in the Chinese market, holding a dominant market position with a share of at least 80%. Pharmaceutical companies producing papaverine hydrochloride injections were highly dependent on Wuhan Yongtong for raw material procurement.

On the other hand, after Wuhan Yongtong acquired its stake in Shandong Huatai in 2018, the latter's market share in the papaverine hydrochloride injection market rapidly increased, maintaining a share of around 50% from 2019 to 2022. Additionally, the regulator found that after Wuhan Yongtong became the exclusive distributor for Qinghai Pharmaceutical Factory, the price of papaverine hydrochloride API rose significantly, leading to higher prices for papaverine hydrochloride injections. The ex-factory price of the injections increased by over 400% in 2018 compared to 2017 and rose by a further 60% in 2019.

Based on these findings, in January 2025, SAMR ordered Wuhan Yongtong to file the equity transfer transaction. After review, SAMR concluded that the transaction would have the effect of excluding or restricting competition in China's papaverine hydrochloride injection market. Following discussions with the parties involved, SAMR ultimately decided that Wuhan Yongtong must transfer its stake in Shandong Huatai to an unrelated third party and terminate its exclusive distribution agreement with Qinghai Pharmaceutical Factory.

This case has drawn attention for several reasons. First, as noted above, it is only the fourth case of a prohibited concentration of undertakings since China's Anti-Monopoly Law took effect in 2008. The previous three cases were Coca-Cola's acquisition of Huiyuan Juice in 2009, Maersk, Mediterranean Shipping Company, and CMA CGM's establishment of a container shipping network center in 2014; and the merger between Huya and Douyu in 2021. This case is now part of the very small number of prohibited transactions.

Second, the most notable aspect of this case is that the annual turnover of the involved parties in China was below RMB 800 million, failing to meet the declaration threshold under Article 3 of the Provisions of the State Council on the Standards for Declaration of Concentrations of Undertakings. However, under Article 8 of the Regulations on the Review of Concentrations of Undertakings, if a concentration does not meet the declaration threshold but there is evidence that it may have the effect of excluding or restricting competition, SAMR may require the parties to declare the transaction and notify them in writing. Previously, antitrust regulatory authority primarily focused on cases where the turnover threshold was met but were not duly filed. Publicly available information suggests that this is the first time SAMR has proactively required a filing for a concentration involving parties whose turnover did not meet the threshold.

These issues are also addressed in the Anti-Monopoly Guidelines for the Pharmaceutical Sector. Article 30 of the guidelines states that due to the relatively small market size of certain pharmaceutical products or the early development stage of some pharmaceutical companies, their annual turnover may not meet the declaration threshold set by the State Council. If a concentration in the pharmaceutical sector does not meet the threshold but there is evidence that it may have the effect of excluding or restricting competition, antitrust regulatory authority may require the parties to declare the transaction and notify them in writing. Furthermore, any organization or individual may report to antitrust regulatory authority if they identify a concentration that does not meet the threshold but may have anti-competitive effects.

Since China's declaration threshold for concentrations is based solely on turnover, in practice, cases where the turnover of the parties involved is below the threshold are often excluded from the filing requirement. This case serves as a reminder that turnover is not the sole criterion—parties should conduct a comprehensive assessment based on the potential impact on market competition.