GlaxoSmithKline ($GSK) had to cough up $500 million to extricate itself from a nasty bribery scandal in China, but the corruption crackdown it got caught in has changed the way drugmakers do business there, leading to new approaches and new organizational structures. For Bristol-Myers Squibb ($BMY), it means a smaller structure, with much of the shrinkage coming in the sales ranks.
For its part, Bristol-Myers is being circumspect about the number and kinds of layoffs it has made in the country, but China Daily, citing Chinese media, says the drugmaker recently laid off 1,000 employees, most of them sales representatives.
"As part of our organizational evolution, we are reviewing and determining the appropriate structure and size of the organization with the objective to best serve our patients in China," the company said in an emailed statement. "We will make every effort to minimize the impact on individuals and to treat all impacted employees fairly in accordance with applicable laws and regulations of China." It went on to say BMS remains committed to long-term operations in China but did not say at what level.
Chinese authorities last year accused GSK of juicing its sales in China by paying bribes to doctors and hospital administrators through a travel slush fund to prescribe and buy its drugs. While no other company has been named by Chinese investigators for similar problems, BMS acknowledged in its third-quarter 10-Q that it is cooperating with a Justice Department and Securities and Exchange Commission investigation into its sales and marketing in some foreign countries and "[i]n particular, the company is investigating certain sales and marketing practices in China."
While the chill on business in China has been warmed by the passage of time, experts say the situation is not what it used to be. "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."
BMS has another factor at play in China affecting its sales. It went into China with a big push in diabetes meds. But last year it agreed to sell to partner AstraZeneca ($AZN) its half of a diabetes drug development operation they shared. The China diabetes business was transferred to the U.K. company in the third quarter. The company declined to say how many employees were affected by that deal and whether AstraZeneca picked up those employees.