Glaxo-Smith-Kline and Novartis among those accused of bribery
The Chinese government is cracking down on large pharmaceutical companies accused of bribing Chinese doctors. Unfortunately, doing business in China routinely involves bribery. With doctors in metropolitan areas making only a few hundred dollars a month, the fact that they accept bribes is understandable.
On September 18, reports surfaced of monies being channeled from a fake clinical trial to bribes in the Alcon division of Novartis. Allegedly, Alcon out sourced the trial to a third party who then paid doctors with “research payments”. In addition to this misappropriation of funds, more cash earmarked for patient experience surveys was instead used to bribe doctors at more than 200 hospitals.
Alcon denies the allegations, stating that a 2012 internal audit found no wrong doings.
Besides Alcon, several other firms are accused of corruption in China. A story on GlaxoSmithKline broke in July according to the 21st Century Business Herald. In August, a former Novartis employee claimed that she was encouraged to offer kickbacks to doctors who used the cancer drug Sandostatin LAR.
Another method of passing along the bribes was through the overbilling, or fictitious billing, for travel and conference services. Not just doctors, but hospital and government officials were also implicated.
Guilt by association: other large pharma companies like Sanofi, Roche, and Novartis have also used Shanehai Linjiang, one of the travel agencies accused of being an intermediary. Chinese authorizes have also visited Eli Lilly and Bayer.
Hence sales of pharmaceuticals in China have rapidly tapered off. Companies under investigation in China dare not promote their products. Other drug companies are also affected since Chinese doctors refuse to even meet with them. Elsewhere, reports state that Glaxo is considering removing itself completely from the Chinese market; four Glaxo executives have been detained and its financial director banned from traveling. While Glaxo has lowered drug prices to compensate for the alleged bribes, it is still facing an estimated decrease in Chinese profits of 30%.
Why crack down now on bribery?
Chinese regulators have been flexing their muscles beyond the drug industry. Earlier this year they made tough conditions for a mining conglomerate to take over a national company. Companies making liquid crystal display panels (LCD), including Samsung were hit by $57M in fines for price fixing. Nestle and Apple are two more large names that have recently tangled with the Chinese government’s crackdown on corruption.
Secondly, there is a new focus on domestic consumption in China. Consumers in country are more important than ever. If one country needs more consumer protection, China is certainly it after a baby formula adulteration killed several infants.
To bring cost-effective healthcare to over a billion people, China needs to encourage the use of non-branded generic drugs. China is a huge market, behind only the US and Japan on the total spent on medication. Thus, large pharmaceutical companies need to learn how to adapt and grow in a different cultural environment.
DeeAnn Visk, Ph.D., is a freelance science writer, editor, and blogger. Her passions include cell culture, molecular biology, genetics, and microscopy. DeeAnn lives in the San Diego, California area with her husband, two kids, and two spoiled hens. You are welcome to contact her at email@example.com