GlaxoSmithKline's China sales set for 30% hit, analysts figure

As third-quarter earnings season nears, analysts are totting up the potential losses in China. And for GlaxoSmithKline ($GSK), at the heart of the pharma bribery scandal there, the damage to sales may run up to 30%.

In fact, that kind of pain could extend past Glaxo. As Reuters reports, Citigroup analysts figure that some multinationals have seen declines of up to 30% volume-wise since June. That's not a huge hit overall because Big Pharma's sales are still concentrated elsewhere. But drugmakers have been counting on China and other emerging markets to help fuel growth as sales increases in mature markets slows.

GSK remains the hardest hit, however, the news service reports. Hospital doctors and staffers may be turning away pharma sales people in general, but they're particularly wary of representatives from the U.K.-based drugmaker. Chinese officials have called GSK the "godfather" of a bribery scheme that moved $490 million to doctors, via travel agents, to boost sales of its drugs. The company has said that some senior managers in China may have breached the rules.

It's all part of the fallout from Chinese government probes into corruption in the pharma industry. Since the GSK investigation came to light in July, one whistleblower after another has tagged Big Pharma companies with bribery allegations. Eli Lilly ($LLY), Novartis ($NVS), Sanofi ($SNY) and, most recently, Novartis' eyecare unit Alcon have all found themselves in the whistleblowers' sights. And official investigations have followed in several cases, with Bayer joining the club two weeks ago. Citigroup analysts figure that Big Pharma needs to rethink its sales strategies--which rely on armies of sales reps, most of them hired over the last couple of years as sales forces in the U.S. and Europe shrank--in the new environment, Reuters says.

Meanwhile, China has been probing pharma's pricing policies, and has levied a fine against Johnson & Johnson ($JNJ) for alleged monopolistic practices. After the GSK corruption allegations surfaced, the company's emerging markets chief, Abbas Hussain, said the company would be cutting its prices in the country. According to Reuters, other drugmakers may need to do the same, particularly with off-patent drugs. 

- read the Reuters news

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