Drug firm to appeal US court decision

North China Pharmaceutical Co Ltd (NCPC) said Tuesday it will appeal the decision by the US District Court of the East District of New York made on November 26 that NCPC and its affiliate Hebei Welcome Pharmaceutical Co Ltd must pay $153 million in fines for colluding to fix the price of vitamin C in the US.

China Business News reported Tuesday that the trial result was the final ruling but the NCPC denied this in an announcement released late Tuesday on the Shanghai Stock Exchange website, saying that it is not the final judgment and the company will appeal to the US Court of Appeals for the Second Circuit.

The NCPC suspended its stock trading on Tuesday before the announcement.

The NCPC lost in a trial on March 14 before a federal court in Brooklyn, New York, which ordered NCPC and Hebei Welcome to pay $162 million in fines to a group of plaintiffs including the US-based Animal Science Products Inc and the Ranis Co Inc.

The NCPC said on March 18 that the ruling distorted the truth and appealed later.

But the latest judgment on November 26 affirmed the previous judgment in March, with the total fine being 52.5 times NCPC's net profit in 2012. NCPC paid $9 million in an out-of-court settlement to some plaintiffs, according to the China Business News report.

The ruling was the result of an eight-year lawsuit filed in 2005, accusing four Chinese vitamin C suppliers of having colluded to raise prices and limit production since 2001.

Another three Chinese vitamin C exporters targeted by the lawsuit settled out of court by March this year, paying a total of $34 million in the settlement, the Global Times reported on March 18.

The Chinese companies are members of a trade group called the China Chamber of Commerce for Import & Export of Medicines & Health Products (CCCMHPIE). financial news portal caixin.com reported on April 10, noting plaintiffs said that the CCCMHPIE helped fix prices of vitamins for its members.

The US plaintiffs alleged that CCCMHPIE agreed on a unified vitamin C pricing strategy and violated US trade rules, the report said.

After the previous trial ruling was made in March, in an attempt to explain the alleged price-fixing practices, CCCMHPIE announced on its website that "the decision failed to recognize the mandatory measures for supervision and administration of the vitamin C industry by the Chinese central government during the transition period of China's economic system."

The decision to impose a fine on Chinese vitamin C firms is unfair and inappropriate, Shen Danyang, spokesman for the Ministry of Commerce, said at a press conference on March 19.

The drug producers' behavior was totally compliant with China's laws and regulations, and the US court's judgment violates the international comity doctrine, said Shen.

CCCMHPIE told the Global Times Tuesday that they had just heard about the trial result and will release an official announcement Wednesday or Thursday.

NCPC's court loss is alarming news for Chinese enterprises, especially those which operate in the export business, said Pan Zhicheng, a lawyer at Shanghai Hui Ye Law Firm.

Both enterprises and industry associations should learn more about antitrust laws of foreign markets, such as the US and EU, Pan said, noting they should be aware of related rules before setting price strategy.

The Vitamin C market is oversaturated in China, Zhong Hong-yue, a healthcare sector expert at consultancy Frost & Sullivan, told the Global Times Tuesday.

Zhong also noted that if NCPC's share of the US market gets affected because of the lawsuit, other Chinese producers will compete for this market share.

Some Chinese pharmaceutical companies rushed into the vitamin C business when prices started increasing in 2009, but later the price went down, news portal qq.com reported on August 1, noting many of these vitamin C producers are facing losses in the vitamin C market this year.