Novartis feels the heat as China opens another bribery probe
Chinese authorities are stepping up their crusade against widespread bribery in the pharmaceutical sector with a newly launched investigation. A string of foreign drug makers have come under scrutiny as part of the crackdown and the latest to get flagged is Swiss-based Novartis, Reuters has reported.
According to Xinhua, China's official news agency, the three-month State Administration for Industry and Commerce (SAIC) probe started on Aug. 15 and will unfold alongside a number of investigations conducted by various Chinese regulators and the police. The National Development and Reform Commission (NDRC), the body charged with pricing oversight, is already looking into 60 foreign and local pharmaceutical companies. SAIC, which is responsible for market supervision, is launching its inquiry with a view to eradicating rampant bribery, fraud and assorted monopolistic practices within a number of industries, according to Xinhua. It said that the official body intended to mete out harsh punishment for companies found to have used bribery to secure contracts for drugs and medical services. Aside from artificially inflating prices and hurting Chinese consumers, commercial bribery interferes with market order by distorting competition and promoting moral and professional corruption, the Chinese news agency added.
Reuters said that the corruption problem in China's pharmaceutical sector was partly the result of low base salaries for local doctors employed at public hospitals. The crackdown reflects the government's drive to root out corruption and keep prices in check as the country looks to implement universal healthcare access. China's healthcare bill is expected to reach $1 trillion by the end of the decade.
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The increased scrutiny of the pharmaceutical industry began last month, when the Ministry of Public Security accused UK pharma giant GlaxoSmithKline of bribing doctors, hospitals and government officials in order to sell more drugs at higher prices. Since then, a string of foreign drug makers have received visits from the authorities, Reuters said. The list includes Eli Lilly, UK-based AstraZeneca, Belgium's UCB and Danish companies Novo Nordisk and H. Lundbeck. Meanwhile, a whistleblower accused French Sanofi of greasing palms and the same has now happened to Switzerland's Novartis. A former company employee told the same newspaper, the 21st Century Business Herald, that she was instructed by her manager to distribute 50,000 yuan (about $8,200) in bribes among doctors to ensure cancer drug sales of 640,000 yuan in June and July. The employee, going under the pseudonym Li Li, used to work for a big Beijing hospital. She threatened Novartis with "unspecified action" unless she was given five million yuan.
Novartis confirmed that a former employee had lodged a complaint against the company. The person has taken the case to the local labour authority and is seeking compensation from Novartis. The company said that its business practice office had commenced an internal investigation, adding that it took very seriously any allegations of misconduct. When the investigation is completed, Novartis will take any action that the findings may call for, the company statement said.