Investigation of Three Drugs for Invoice Fraud Affects Stock Market Fluctuations

On December 20, China’s National Healthcare Security Administration (NHSA) issued an official letter to provincial and regional healthcare bureaus, requiring an investigation into ginkgo leaf extract injection, cefotaxime sodium injection, and hydrolyzed protein oral solution to determine whether these products are involved in invoice fraud schemes similar to recent cases in the pharmaceutical industry. The investigation aims to clarify the actual net prices of these products.

The NHSA's letter highlighted that, according to a report by Economic Information Daily, public security authorities cracked two pharmaceutical invoice fraud cases in 2022 and 2024. These investigations revealed a dual-pricing system for pharmaceuticals, including a "list price" and a "net price." Manufacturers sold medicines to distributors at the list price, and distributors then sold them to medical institutions. After transactions, the price difference between the list price and net price was refunded to the distributors. This price gap, disguised through fraudulent invoices, was then withdrawn as profits or used for commercial bribery, artificially inflating drug prices from the source.

For instance, the report detailed that the net price of ginkgo leaf extract injection was CNY 8.5 per unit, while its list price reached CNY 25.28 per unit, generating a commission of CNY 4 per unit for doctors. Similarly, cefotaxime sodium injection's net price was CNY 6.5 per unit, and its list price was CNY 16.5 per unit, with a doctor commission of CNY 2.5 per unit. Commissions commonly accounted for over 20% of the price gap between the list and net prices.

The mentioned drugs are linked to several listed companies, leading to significant stock price fluctuations upon the market opening on Monday. Among these, Sci-Tech Innovation Board-listed Yekang Pharmaceutical saw its stock price plunge over 18% intraday, closing down more than 14% due to its flagship ginkgo leaf extract injection being named. According to Yekang’s IPO prospectus, this product's hospital sales volume and revenue grew significantly from 2017 to 2019.

Companies such as Kangyuan Pharmaceutical and Yibai Pharmaceutical, also involved in ginkgo products, saw their stock prices decline by 2.09% and 4.61%, respectively. Cefotaxime sodium injection also triggered major declines in the shares of multiple companies. As the second-largest product in cefalosporins with a national hospital market sales value exceeding CNY 3.5 billion in 2023, the drug’s inclusion in the investigation sent Lingkang Pharmaceutical's stock price to a daily limit down, while Luoxin Pharmaceutical fell 6.12% and Zhendong Pharmaceutical dropped 5.41%.

Notably, cefotaxime sodium injection remains outside China’s national centralized procurement program despite widespread use of other cefalosporins within the program.