Pharma suffers in China as widening scandal spooks docs, reps

There's no doubt the pharma bribery scandal has been bad for business in China. Just how bad? That remains to be seen. But in the meantime, Reuters reports that drugmakers are struggling to push their products--and explores how those problems might affect third-quarter results.

Fearful doctors, who have grown more cautious with the widening scandal, pose a major hurdle to pharma sales efforts. As one former sales rep told Reuters, some doctors accustomed to seeing upwards of 10 sales staff per day have slashed visits altogether. "A lot of doctors were sent reeling by this and they decided they just did not want to see anybody," an unnamed head of pharmaceuticals at one company told the news service.

Drugmakers themselves have been just as cautious, the news service notes. Many have scrambled to make sure they're up to speed with compliance. Others have cut back on marketing activity, afraid their reps might be detained by authorities. "Some companies have told their sales reps to stay at home or take a vacation," Simon Li, China general manager for healthcare information company Kantar Health, told Reuters.

Unsurprisingly, GlaxoSmithKline ($GSK), the first company Chinese officials accused of bribery, has suffered the most. Reuters sources say they expect Glaxo's China sales growth to slow dramatically or even reverse in the third quarter, contrasting with a 14% year-on-year increase in the previous period.

But it's not just Glaxo whose sales have taken a hit. Several other companies, including Sanofi ($SNY), Novartis ($NVS) and Eli Lilly ($LLY), have also faced bribery allegations. As a chill sweeps through the industry, many companies have tossed out their monthly or quarterly sales quotas and now warn that their China sales may suffer, Reuters says. "I think you will probably find, for at least the next couple of months, turbulence in the marketplace in some sectors," Sanofi CEO Chris Viehbacher told a conference in London last week (as quoted by Reuters). "There is an awful lot of confusion out there," he added.

While some drugmakers are putting their operations in order, others are trying to eradicate corruption in China and working with authorities to root out its causes. As the Financial Times reports, RDPAC, the trade body for foreign pharma businesses in China, and PhRMA, the association for U.S. drugmakers, this week released a joint memo asking industry players to step up. For example, the associations call on pharma players to urge the government health system to compensate medical providers adequately.

But one China-based executive at a foreign company told Reuters putting an end to corruption won't be that easy. "Pharma companies are just going to find ways around it," the source said. "Some got caught because they used one or three travel agents, so they're just going to use loads [of travel agents], or find another way to channel the money."

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