Big Pharma, beware of your former (and possibly current) employees in China. Novartis ($NVS) is the latest drugmaker to be fingered for bribery by an anonymous whistleblower, just a few days after Sanofi ($SNY) got the same treatment. And Chinese officials say they're stepping up their pharma investigation even further.
The State Administration for Industry and Commerce says it's launching a new, three-month probe into corruption in the pharma and medical services business. The business watchdog says it's cracking down on bribery, fraud and anticompetitive business practices, Reuters reports, citing Xinhua. The government has explicitly linked bribes with higher drug prices, so whatever the stated motivation for the probe, cutting those prices appears to be part of the goal.
The former Novartis sales rep told the 21st Century Business Herald--which also broke the Sanofi story--that she was ordered to bribe doctors to increase sales of a cancer drug, Sandostatin LAR. She claims she was given a quota of 650,000 yuan in sales in July, or about $105,000, too high to achieve via "ordinary practices," Shanghai Daily reports, citing the Herald.
According to the rep, identified only as "Li Li," her supervisor advised her to offer kickbacks to doctors who prescribed 5 doses of the drug, and allocated 50,000 yuan to the purpose. She was also told to persuade doctors to use Sandostatin for off-label use.
If Sanofi and GlaxoSmithKline's ($GSK) experiences are any guide, the whistleblower's allegations would lead to a government investigation. Chinese law enforcement detained four GlaxoSmithKline managers last month after a whistleblower claimed the company had bribed doctors; the government now alleges that GSK employees spent some $590 million persuading prescribers to use more of its drugs. Last week, Sanofi's whistleblower told the Herald that the company bribed 503 doctors with 1.7 million yuan in "research grants." This week, Chinese watchdogs launched their own probe.
Glaxo has admitted "breaches" at its Chinese unit and apologized for the "shameful" allegations; it also promised to cut prices. Sanofi and Novartis have each said they don't brook unethical behavior and will investigate the bribery accusations internally. Whether pricing promises will follow remains to be seen.
Other drugmakers report recent visits from Chinese authorities, including Eli Lilly ($LLY), UCB, Lundbeck and Novo Nordisk ($NVO). Two AstraZeneca ($AZN) employees were taken in for questioning, though the company says that's separate from the broader probe. None of these companies faces official accusations, at least so far.
With Chinese authorities actively looking for any suggestion of corruption or bribery, we're likely to see more whistleblowers come forward and official investigations follow. Though no one wants to admit it, payments to doctors and hospitals have been commonplace in China for years. The BBC reported this week that bribes are "routinely paid" by big drugmakers in China, citing 5 pharma reps working in China. One of those reps, however, said such payments are "rare," and "only very few people" get money from pharma.
The government previously tolerated the practice--or encouraged it, even, by putting doctors on paltry salaries. Now, officials are targeting foreign drugmakers for it, perhaps to make examples of them, perhaps to twist their arms for lower prices. Probably both.
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