Roche becomes latest target of China corruption crackdown

When an editorial last week in Chinese state news agency Xinhua warned multinational companies to "respect the Chinese market" and remember "that ethics matter," it clearly was more than just idle chatter. The country is in the midst of a full-blown corruption investigation aimed largely at Big Pharma, and now it has picked another target: Swiss drugmaker Roche ($RHHBY).

The company confirmed today that China's State Administration for Industry and Commerce (SAIC), which investigates bribery and corruption, had visited its offices in Hangzhou, according to Reuters.

An SAIC spokeswoman told Reuters the Roche visit was related to several issues, but she did not elaborate. Nor was Roche able to provide details. "We will cooperate fully with the work of the relevant government department," Roche said in a statement obtained by Reuters.

The visit came in the wake of a widening scandal involving GlaxoSmithKline ($GSK). Last week, China slapped bribery charges on three GSK executives, including Mark Reilly, who formerly headed up the company's office there. Such charges can carry a penalty of life in prison. Even a lesser prison term would be an uncommon penalty for a foreign executive. The charges came out of an investigation into allegations that GSK used travel agencies to funnel bribes to healthcare providers.

Chinese President Xi Jinping

One of those travel agencies, Shanghai Linjiang, also worked with Roche, according to Bloomberg. But Roche said it stopped working with the agency last summer, when the allegations of illegal activities first surfaced.

Chinese president Xi Jinping has made it clear the country will continue to investigate suspected corruption. China's crackdown on the drug industry hit close to home earlier this week, when Liu Zhanbin, the chairman of Chinese generics maker Harbin Pharmaceutical Group, jumped to his death from a hospital bathroom. The suicide came just two days after prosecutors launched a formal probe into Harbin.

Roche has been flying high in China up until now: Its sales in that country rose 21% last year, according to Reuters. But trouble in China can be very bad for business. GSK--which is now facing tax evasion accusations in China, as well--saw its drug and vaccine sales drop 20% there in the first quarter.

- here's the Reuters story
- read more at Bloomberg