The special investigation squad of the Tokyo District Public Prosecutors Office has indicted three major drug wholesalers on charges of rigging bids for contracts to supply ethical drugs ordered by an independent administrative body, in response to a criminal complaint filed early on Wednesday by the Fair Trade Commission.
A total of seven officials, including executive officers, at the three companies have also been indicted on the same charges without being arrested.
The three companies are Alfresa Corp., Toho Pharmaceutical Co. -- both based in Tokyo -- and Suzuken Co., which is based in Aichi Prefecture. The seven indicted officials, who held their titles in 2016 or 2018, include Alfresa executive Nobuyuki Gomi, Suzuken executive Takeshi Nakahara, and the chief of Toho's department for general hospital business.
Mediceo Corp., another major Tokyo-based drug wholesaler that was also investigated with the three indicted firms, was not charged or indicted due to the leniency program under the Antimonopoly Law as the first company among the four that admitted its involvement to investigative authorities.
According to the indictment and other sources, the officials at the three companies held meetings at rental conference rooms in Tokyo and elsewhere to fix the winners and contract prices to supply drugs to be used at 57 hospitals run by the Japan Community Health Care Organization (JCHO) in 2016 and 2018. The JCHO placed orders for two-years supply of about 7,000 to 8,000 products.
Four out of the seven indicted officials were involved in bid-rigging on the two occasions and the three firms have confessed to the charges, the investigative sources said.
According to those familiar with the case, the JCHO had the four companies submit their estimation and set undisclosed estimates. However, they contacted each other knowing the estimates almost precisely.
If the rate of winning the contracts was likely to differ among the four companies due to a change in the bidding system or for other reasons, the officials in question also made arrangements for that purpose, the sources said. They sometimes exchanged documents, which indicated bidding prices, near JR Tokyo Station so that officials of Nagoya-based Suzuken could participate easily. As a result of such arrangements, the winning bid for the contracts was about 99% of the prices in the order-placement forecasts for the two occasions, according to investigative sources.
The four companies won orders from JCHO worth about 64 billion yen in total in 2016, and about 68 billion yen in total in 2018, both with tax excluded. The breakdown for each company was from about 13.8 billion yen to 20.3 billion yen in 2016, and from about 14.4 billion yen to 21.6 billion yen in 2018.
The practice of bid-rigging started in 2008 when JCHO's predecessor entrusted management of its hospitals to the Association of National Social Insurance Society, according to sources. The practice was carried out during tendering in 2014 when JCHO was established. However, as the statute of limitations for bid-rigging expires after five years, prosecutors narrowed the indictment down to the cases in 2016 and 2018.
The FTC carried out compulsory investigations into the four companies in November last year and prosecutors also searched their premises with the FTC in October this year.
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