News / Economy

More Foreign Pharmaceutical Firms Could be Probed in China

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.
Reuters
— China's official news agency hinted that more foreign pharmaceutical firms could soon be implicated in a corruption scandal sweeping the industry, in the wake of bribery accusations against British drugmaker GlaxoSmithKline.

"It will not be surprising if more pharmaceutical companies and hospitals, domestic or international, are to be involved in probes in the days to come,'' the Xinhua news agency said on Wednesday in an English-language commentary.

Xinhua did not name any firms or hospitals, but said the government was trying to tackle "rampant'' malpractice in the pharmaceutical sector, including corruption.
    
Underscoring the rot in China's health sector, state media said more than 1,000 doctors, nurses and administrators at 73 hospitals in Zhangzhou city in the southeastern province of Fujian had been found taking kickbacks.

State broadcaster CCTV said 90 percent of the city's doctors were involved and that authorities had recovered 20.5 million yuan ($3.34 million) in illicit funds after a six month investigation.
   
A lot of the kickbacks revolved around the distribution of medicines, CCTV said. It said 57 people, called "drug reps" in the report, had been detained. CCTV did not name any companies.

Chinese police have accused GlaxoSmithKline of funneling up to 3 billion yuan ($488.81 million) to travel agencies to facilitate bribes to doctors and officials to boost sales and the price of its medicines in China.

GSK has called the accusations "shameful" and on Monday said some of its Chinese executives appeared to have broken the law.

Xinhua said multinational pharmaceutical companies should set a good example for local firms.

"Big international firms should shoulder [their] due responsibilities to bid farewell to malpractice," it said.

Such commentaries, while not official statements, provide a window into the government's thinking. English-language commentaries are also often intended for international consumption.

Government crackdown

Xinhua said the following government agencies were all taking action: the ministries of public security and health, the National Development and Reform Commission, which sets prices, and the State Administration for Industry and Commerce, a regulator.

"It is true that malpractice has [been] rampant in China's pharmaceutical industry and hospitals for years, but now China [is] determined to reform its health system and root out malpractice, including taking kickbacks and price-fixing," the commentary added.

Chinese police have questioned local employees from another British drugmaker, AstraZeneca. The company has said police were treating this as an individual case and not related to other investigations.

Authorities have also visited the offices of Belgian drugmaker UCB. And the authorities have detained a British and a U.S. citizen, although it is not clear if those detentions were directly linked to the pharmaceutical probe sparked by the GSK allegations.

Corruption in China's pharmaceutical industry is fueled in part by the low base salaries for doctors at the country's 13,500 public hospitals.

On Tuesday, Xinhua said 39 employees at a hospital in southern Guangdong province would be punished for taking kickbacks totaling 2.82 million yuan from two local drugmakers between January 2010 and December 2012.

China has committed to making health care affordable for its 1.37 billion people. But ordinary Chinese cite the cost of medicine as a major irritant. Many Chinese prefer foreign brands over local drugs because of the widespread circulation of fake medicine.

China's State Council, or cabinet, on Wednesday said in a statement posted on the government's website that it would reform drug pricing and procurement mechanisms, guarantee drug quality and "fairly reduce drug costs... and resolutely investigate illicit kickback behavior."

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