Behind the China Bribery Scandals

The last few weeks have seen the media swamped with stories about the rampant bribery clawing the pharmaceutical industry in China. Big names were engulfed in the scandal, including GSK, AstraZeneca, Sanofi, Novartis, Eli Lilly, Novo Nordisk and UCB amongst others.

Last month, four GSK executives were put under investigation for allegedly paying up to $480 million to doctors, hospital administrators, government officials and medical groups to promote the use of its medications. The limelight then shifted to Sanofi when some of its employees were accused of paying bribes totaling up to $280,000 to more than 500 Chinese doctors across 79 hospitals six years ago. The newspapers also alleged that Sanofi paid doctors 80 yuan each time a patient bought its products, with the largest payment said to be 11,200 yuan.

Novartis has also fallen prey to bribery allegations in China. The Swiss drug maker was accused of paying doctors $8000 to prescribe its cancer drug, Sandostatin LAR. Sales figures were expected to increase in June and July this year as a result. Eli Lilly is now the latest being investigated after a former employee alleged in a report that the company spent more than $490,000 to bribe doctors in China. The former sales manager said that Eli Lilly offered kickbacks to ensure doctors used its drugs, including its insulin brand.

According to reports from the official Xinhua news agency, the severity of these incidents has prompted further investigation by the State Administration for Industry and Commerce (SAIC), a regulator in charge of market supervision, which aims to stamp out bribery, fraud and other anti-competitive practices in various sectors. The National Development and Reform Commission (NDRC) and the police have already started investigations on how foreign and domestic companies conduct their businesses in China.

The BBC reported that it is common for pharmaceutical sales representatives to bribe in order to increase product sales. In fact, a salesman told the BBC that his company offered approximately $1000 to have its product placed back on the shelves of one hospital. The product was discontinued at the hospital and to have it back on the shelves, the company would have to go through complicated procedures that would cost significant amount of money and energy, hence, an easier alternative was used. The company paid a bribe to ensure that the product returned to the hospital’s shelves as it would have cost a lot more to achieve the same results through official routes.

China ranks high when it comes to corruption and the bribery scandal is said to be fuelled by the country’s dysfunctional healthcare system. Doctors, nurses and hospital administrators are so poorly paid that they are easily tempted to accept money from drug suppliers. Moreover, as hospital staffs, doctors in China are not allowed to take on second jobs to increase their income.

“Physicians are way underpaid and they need to find a way to survive,” said Gordon Liu, a healthcare economist at Peking University’s Guanghua School of Management, in a press release. Under the current healthcare system, it costs as little as $1.25 to see an oncologist or other specialists and the monthly pay of an experience physician is typically $980.

It is common practice for doctors and hospital employees to accept money to provide better services or move patients up waiting lists for surgery. Hence, it should come as no surprise that doctors and hospital administrators take kickbacks from pharmaceutical companies to use more expensive drugs or prescribe them more often.

Many believe that the bribery scandal involving Big Pharma is just the tip of the iceberg to the many problems in China. The fight against corruption in China’s healthcare industry has begun but it will be a long and hard one. The government is striving to increase access of medicines while tightening its healthcare budgets and as a result, Chinese regulators are now investigating pricing policies of many foreign and domestic pharmaceutical companies. China, once viewed as a favourable emerging market for the industry, may not live up to pharma’s expectations after all.