Another Chinese whistleblower has targeted Big Pharma. This time, the bribery allegations involve Eli Lilly ($LLY), and 30 million yuan in purported kickbacks to Chinese doctors. That's about $4.9 million, or 1% of the amount GlaxoSmithKline ($GSK) allegedly spread around, but if the previous pattern holds, China's government watchdogs will officially follow up on the media report.
Lilly's whistleblower, like those who raised questions about Sanofi ($SNY) and Novartis ($NVS), spoke to the 21st Century Business Herald, a business newspaper based in Guangzhou. Identified as a former sales manager, the anonymous source said Lilly salespeople used "bribes and special payments of all sorts" to push the company's products. "The level of the problem was just as bad as at GlaxoSmithKline," the whistleblower told the paper (as quoted by Reuters).
Fighting Novo Nordisk ($NVO) for a share of the fast-growing Chinese diabetes market, Lilly allegedly paid hospital doctors in Shanghai and Anhui for each new patient put on Lilly's diabetes drugs Humulin and Byetta. The company also paid doctors to give talks to other prescribers.
Lilly says it's "deeply concerned" by the allegations and is checking them out internally. Indeed, Lilly investigated similar allegations raised last year by a former sales manager, by auditing expense reports and monitoring email, among other things. Of the latest report, Lilly said, "Although we have not been able to verify these allegations, we take them seriously, and we are continuing our investigation."
As the Financial Times points out, Lilly last year agreed to pay $29 million to settle allegations in the U.S. under the Foreign Corrupt Practices Act. According to the Securities and Exchange Commission (SEC), Lilly employees falsified expenses in China to allow sales reps to offer gifts, meals and visits to bath houses. The infractions allegedly took place from 2006 to 2009. Pfizer ($PFE) and Johnson & Johnson ($JNJ) have also paid millions to settle FCPA investigations.
Glaxo was the first Big Pharma to face public allegations of bribery in China. Prompted by a whistleblower report, GSK launched an investigation and said it found no evidence that the allegations were true. Soon after, the government detained four of the company's top employees in China, and the scandal snowballed from there, with 18 more employees detained and allegations of $489 million in bribes.
Sanofi and Novartis now face official scrutiny, too, after former employees blew the whistle in the Herald. Those whistleblowers quoted amounts far less than $489 million--or even $4.9 million. Sanofi allegedly spent some $280,000 in 2007 to bribe more than 500 doctors. Novartis last week launched an internal investigation.
Chinese authorities have visited a handful of other drugmakers, including AstraZeneca ($AZN), Lundbeck, UCB and Novo Nordisk. It's not clear whether these visits were routine or connected with the corruption probe. But last week, Chinese watchdogs said they were intensifying their pharma investigation and launching another three-month inquiry.
Special Reports: 10 Largest Settlements and Judgments | Top 10 Pharma Companies by Employees