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Reforms urged for pharma industry

Updated: 2013-09-04 02:42
By XU WEI ( China Daily)

Experts have called for reforms of public hospitals and more legislation on the pharmaceutical industry, after police revealed more details on Tuesday of suspected financial violations by GlaxoSmithKline China.

The British pharmaceutical giant has been under investigation since early July over suspected bribery and tax-related violations, more details of which have been provided recently by company employees, according to the website of the Ministry of Public Security.

According to police investigators, the pharmaceutical company had "indulged" in the bribery of doctors — or at least "given tacit permission" — saying that individual employees were responsible for transgressions.

Chinese authorities have detained four Chinese GSK executives on allegations that employees paid nearly $490 million in bribes through travel agencies to hospital officials and doctors with the aim of boosting sales of pharmaceutical products.

Huang Hong, general manager of GSK's business operations in China, told Xinhua News Agency that the company set an annual growth target of 25 percent, which is 7 to 8 percent higher than the industry average.

The "irrational" target was impossible to accomplish without violating regulations, she said.

Meanwhile, a sales team covering the company's major customers was expanded from less than 10 members to more than 50 over the past five years, and was allocated almost 10 million yuan ($1.63 million) of "public relations funds". This money was allegedly used to maintain close ties with key staff members in charge of the allocation of drugs in major hospitals, to ensure that GSK products would be prescribed by doctors.

As of Tuesday night, China Daily had not received a response to the allegations from GSK China.

However, the bribery allegations against GSK China reflect what many consider to be widespread practice in the pharmaceutical industry across the country, and experts are calling for swift legislation and reforms to prevent similar cases.

"It (the alleged bribery by GSK China) was only the tip of an iceberg. Such behavior is common among domestic pharmaceutical companies as well," said Wang Yaoguang, director of the pharmaceutical law institute at Tsinghua University.

Underlying the bribery of doctors is a lack of regulation to provide clear rules on communications and transactions between drug makers, hospitals and doctors, he said.

"There are no regulations guiding how a drug maker should promote a new product to hospitals and doctors. The doctors learned their knowledge at medical schools years ago, and they do not know about the latest developments in pharmacology," he said.

Wang said the solution to the problem lies in the establishment of an industry regulation that guides the drug purchases of hospitals, enabling an open channel through which drug companies can pitch their products.

Broader reforms

Yu Mingde, chairman of the China Pharmaceutical Enterprises Association, echoed Wang's claim that bribery of doctors is a common practice for pharmaceutical companies seeking to increase their sales.

However, he said he believes that a solution to the issue of corruption lies in reform of the public hospital system to ensure the incomes of doctors.

"Despite the ongoing medical reforms, many hospitals still rely on pharmaceutical sales to maintain their operations, which is a major reason for bribery from pharmaceutical companies," he said.

"The problem can only be solved through reform of funding sources for public hospitals, and enabling them to open their operations to the market."

The police investigation of GSK is part of a wider campaign by the central authority to crack down on commercial bribery inside the pharmaceutical industry.

Wang Hongyi contributed to this story.

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