News / Asia

GSK Scandal Reveals Shortcomings in China's Health Care System

A Chinese national flag flutters in front of a GlaxoSmithKline (GSK) office building in Shanghai, July 12, 2013.
A Chinese national flag flutters in front of a GlaxoSmithKline (GSK) office building in Shanghai, July 12, 2013.
VOA News
A series of investigations into hospitals and pharmaceutical companies in China has uncovered extensive use of kickbacks and spurred a debate over how to reform the country’s health care system.
The inquiries include the probe targeting Britain’s GlaxoSmithKline drug group and dozens of hospitals in China implicated in a $500 million scheme to bribe officials and doctors to promote sales. 
The practices uncovered in the GSK scandal are no surprise to those working in China’s health care system, said Benjamin Shobert, managing director of Rubicon Strategy Group - an organization that advises foreign companies entering the Chinese health care market.
“The question was when one of the big players was going to get caught, and what was going to be the fallout from the government deciding to crack down,” Shobert said.
An open secret
A radiology worker at one Beijing hospital, who wished to remain anonymous, told VOA that so called “commissions” to doctors are a common occurrence.
“The hospital often holds meetings saying that doctors cannot prescribe medicine with commissions, once found they will lay you off, and deduct money,” she said, “But privately nobody is so inflexible.”
A recent survey by the Chinese Medical Association indicates some 54 percent of doctors in China admit to having accepted sales kickbacks from drugs companies.
Media reports have also focused on the impact corruption has on the price of drugs and consumers. GSK executives have been quoted in the media as saying that the cost of financing the bribery scheme led them to mark up drug prices by 20 to 30 percent.
Overpriced drugs
A related probe in the coastal city of Zhangzhou found that most employees working at all of the city's 72 hospitals had accepted bribes. As a result, by some accounts patients were charged 10 times what the hospital paid for a drug.
“This idea that if every drug out there… has this kind of inefficiency built into it, that is an unsustainable inefficiency,” said Shobert. “It needs to go away.”
But analysts believe the only way to stop hospital corruption is to fundamentally change the way health care is financed in China. 
A problem born from market reforms?
Before China’s free market reforms started, in the late 1970s, the health care system was largely public and covered almost the entire population.
In its push to liberalize financially onerous sectors of its economy, the government reduced public subsidies to health care in the mid-1980s and allowed hospitals to earn income from services and drugs.
Thirty years later, the government owns and operates over 90 percent of China’s hospitals, but only provides a small percentage of their funding.
“These abuses evolved as a matter of necessity,” said Shobert. “Doctors and hospitals had to find ways to make up shortfalls in funding and reimbursements as an institution. And as an individual, doctors had other ways to capture compensation.”
More state money at stake
For years, Chinese patients shouldered much of the rising costs of the health care system, but that is changing, says Wu Xun, associate professor at the Lee Kuan Yew School of Pubic Policy of the National University of Singapore.
“After 2009 the government has very aggressively pumped in more resources into the health system, mostly to finance the health care scheme,” Wu said.
This has included expanding basic medical coverage to China's rural population as well as a implementing a broader plan for national health care reform. 
Wu said that means it’s no longer only the patients shouldering the cost of graft.  
“Much of this corruption costs end up with more costs for the government insurance fund,” Wu added.
As the government’s financial stakes in health care grow, analysts believe it will need to make the system more efficient and less corrupt.
Analysts say the government case against GlaxoSmithKline and others implicated in bribery schemes is a necessary first step, but should be followed by more extensive reforms in hospitals' management, funding and accounting.
Shobert said clearer limits on how companies should operate within the sector will be a welcome development for foreign firms that are desperate to grab a share of the China market.
“China is so critical for these pharmaceutical companies in terms of justifying their share price,” he said. “They have to know what the rules are, they have to know how they are going to get enforced and right now, all of those things being thrown in flux, there is a lot of concern about what exactly can we generate from China in terms of profitable and sustainable growth.” 
GlaxoSmithKline executives have already apologized to Chinese authorities over the bribery scandal and launched an internal investigation. The firm replaced the head of its China operations this week, and warned the scandal could have some impact on its future performance in the country.

You May Like

Video Americans, Tourists, Reflect on Meaning of Thanksgiving

VOA garnered opinions from several people soon after November 13 Paris attacks, which colored many of their thoughts

Video Thais Send Security Concerns Down the River

In northern Thailand, the annual tradition of constructing floating baskets to carry away the year’s bad spirits highlights the Loy Krathong festival

Video Tree Houses - A Branch of American Dream

Workshops aimed at teaching people how to build tree houses have become widely popular in America in recent years

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Belgium-Germany Border Remains Porous, Even As Manhunt For Paris Attacker Continuesi
Ayesha Tanzeem
November 25, 2015 10:46 PM
One of the suspected gunmen in the Nov. 13 Paris attacks, Salah Abdeslam, evaded law enforcement, made his way to Belgium, and is now believed to have fled to Germany. VOA correspondent Ayesha Tanzeem makes the journey across the border from Belgium into Germany to see how porous the borders really are.

Video Belgium-Germany Border Remains Porous, Even As Manhunt For Paris Attacker Continues

One of the suspected gunmen in the Nov. 13 Paris attacks, Salah Abdeslam, evaded law enforcement, made his way to Belgium, and is now believed to have fled to Germany. VOA correspondent Ayesha Tanzeem makes the journey across the border from Belgium into Germany to see how porous the borders really are.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video After Paris Attacks, France Steps Up Fight Against IS

The November 13 Paris attacks have drawn increased attention to Syria, where many of the suspected perpetrators are said to have received training. French President Francois Hollande is working to build a broad international coalition to defeat Islamic State in Syria and in Iraq. Zlatica Hoke reports.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Americans Sharpen Focus on Terrorism

Washington will be quieter than usual this week due to the Thanksgiving holiday, even as Americans across the nation register heightened concerns over possible terrorist threats. VOA’s Michael Bowman reports new polling data from ABC News and the Washington Post newspaper show an electorate increasingly focused on security issues after the deadly Islamic State attacks in Paris.

Video World Leaders Head to Paris for Climate Deal

Heads of state from nearly 80 countries are heading to Paris (November 30-December 11) to craft a global climate change agreement. The new accord will replace the Kyoto Protocol on Climate Change that expired in 2012.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

Video Creating Physical Virtual Reality With Tiny Drones

As many computer gamers know, virtual reality is a three-dimensional picture, projected inside special googles. It can fool your brain into thinking the computer world is the real world. But If you try to touch it, it’s not there. Now Canadian researchers say it may be possible to create a physical virtual reality using tiny drones. VOA’s George Putic reports.

Video New American Indian Village Takes Visitors Back in Time

There is precious little opportunity to experience what life was like in the United States before its colonization by European settlers. Now, an American Indian village built in a park outside Washington is taking visitors back in time to experience the way of life of America's indigenous people. Carol Pearson narrates this report from VOA's June Soh.

Video Even With Hometown Liberated, Yazidi Refugees Fear Return

While the northern Iraqi town of Sinjar has been liberated from Islamic State forces, it's not clear whether Yazidi residents who fled the militants will now return home. VOA’s Mahmut Bozarslan talked with Yazidis, a religious and ethnic minority, at a Turkish refugee camp in Diyarbakır. Robert Raffaele narrates his report.

Video Nairobi Tailors Make Pope Francis’ Vestments

To ensure the pope is properly attired during his visit, the Kenya Conference of Catholic Bishops asked the Dolly Craft Sewing Project in the Nairobi slum of Kangemi to make the pope's vestments, the garments he will wear during the various ceremonies. Jill Craig reports.

Video Cross-Border Terrorism Puts Europe’s Passport-Free Travel in Doubt

The fallout from the Islamic State terror attacks in Paris has put the future of Europe’s passport-free travel area, known as the "Schengen Zone," in doubt. Several of the perpetrators were known to intelligence agencies, but were not intercepted. Henry Ridgwell reports from London European ministers are to hold an emergency meeting Friday in Brussels to look at ways of improving security.

Video El Niño Brings Unexpected Fish From Mexico to California

Fish in an unexpected spectrum of sizes, shapes and colors are moving north, through El Niño's warm currents from Mexican waters to the Pacific Ocean off California’s coast. El Nino is the periodic warming of the eastern and central Pacific Ocean. As Faiza Elmasry tells us, this phenomenon thrills scientists and gives anglers the chance of a once-in-a-lifetime big catch. Faith Lapidus narrates.

Video Terrorism in Many Forms Continues to Plague Africa

While the world's attention is on Paris in the wake of Friday night's deadly attacks, terrorism from various sides remains a looming threat in many African countries. Nigerian cities have been targeted this week by attacks many believe were staged by the violent Islamist group Boko Haram. In addition, residents in many regions are forced to flee their homes as they are terrorized by armed militias. Zlatica Hoke reports.

Video Study: Underage Marriage Rate Higher for Females in Pakistan

While attitudes about the societal role of females in Pakistan are evolving, research by child advocacy group Plan International suggests that underage marriage of girls remains a particularly big issue in the country. VOA’s Ayesha Tanzeem reports how such marriages leads to further social problems.

VOA Blogs