Western drugmakers were pretty head-over-heels about prospects in China until authorities launched a bribery probe against GlaxoSmithKline ($GSK) which dragged on for a year and ended with a half billion dollar fine and people going to jail. That has left drugmakers to rethink their strategies there and for Bristol-Myers Squibb ($BMY) it means cutting hundreds off its payroll.
Chinese media said most of the cuts are sales reps, according to China Daily. A BMS spokesperson in an email today declined to give specific numbers or details of the cuts.
A company statement says: "As part of our organization's evolution, we are reviewing and determining the appropriate structure and size of the organization with the objective to best serve our patients in China. We will make every effort to minimize the impact on individuals and to treat all impacted employees fairly in accordance with applicable laws/regulations of China." It went on to say BMS remains committed to long-term operations in China but did not say at what level.
|GlaxoSmithKline's China headquarters--Courtesy of GSK|
Last year, Chinese authorities accused GSK of paying bribes to doctors and hospital administrators to entice them to prescribe and buy its drugs. China has long been known for its graft but the GSK program was exposed by a disgruntled employee about the same time that China's premier was making moves to dampen corruption in the country. The result was that Chinese police rounded up GlaxoSmithKline employees in three cities, putting some of them on television where they acknowledged use of a slush fund of "travel money" used to grease the wheels in the country.
The company fessed up and apologized and in September, after more than a year of public flogging, the drugmaker agreed to pay a $500 million fine to resolve the matter. The top exec for the company there narrowly escaped going to prison in the process while an investigator for the company was given jail time. The scandal has scared doctors and healthcare workers and made it difficult for sales teams to get access to those with drug-buying authority.
"What we know is that sales representatives' access to hospitals in general, and physicians specifically, is not going to be as easy and readily available as it has been in the past," Benjamin Shobert, managing director of Rubicon Strategy Group in the U.S. told China Daily. "So, multinational pharmaceutical companies must find new, innovative ways of accessing these key opinion leaders."
It is not as if BMS has not been making cuts elsewhere in the world to get its costs in line as patent cliff problems sucked revenues away. Two years ago, it dumped nearly 500 sales positions in the U.S. after its blockbuster Plavix went off patent and early last year another 400 positions when it closed up the California headquarters for Amylin after buying it out for its diabetes portfolio. A year ago, it bailed out of its diabetes partnership with AstraZeneca ($AZN) as part of its plan to become more focused on immuno-oncology. Its initial plans in China were to concentrate on diabetes and with that piece of its operations winding down, there may be less need for people there.
- read the China Daily story