Curing the drug market of its ills
- By Han Qi
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E-mail China Daily, August 21, 2013
China has ordered investigations into alleged corrupt practices of some multinational pharmaceutical companies following the bribery scandal of British pharmaceutical giant GlaxoSmithKline and detention of four of its senior executives last month. Infant formula makers are also part of the investigations.
Earlier this month, the National Development and Reform Commission, China's top economic planning body, imposed a record fine of 670 million yuan ($110 million) on six infant formula producers, including Mead Johnson and Abbott, for price fixing.
Despite being based on Chinese law, the crackdown on the corrupt practices has invited complaints from some foreign media outlets. A few conspiracy theorists even allege the crackdown, aimed at streamlining the pharmaceutical and infant formula market, is part of China's broader plan to tighten the grip on multinationals to benefit local brands. And some of them blame China's business environment for the medicine and infant formula scandals, claiming that the GSK case highlights the risks multinationals face in the Chinese market, where the "healthcare system is notoriously dogged by graft".
The fact is that it has been proved beyond doubt that some foreign companies were involved in corrupt practices. Chinese authorities have found that some senior GSK executives are guilty of commercial bribery and tax crimes. These executives paid bribes to government officials, medical associations, hospitals and doctors, either directly or through sponsorship, to boost the sales of their products. Also, GSK issued exclusive but false value-added tax invoices to get cash and colluded with travel agencies to issue fake invoices to finance their illegal acts.
Responding to the investigation, GSK issued a statement in mid-July, saying: "Certain senior executives appear to have acted outside of our processes and controls which breaches Chinese law. We have zero tolerance for any behavior of this nature."
Such criminal violation of law will invite penalty in any country. As Ministry of Commerce spokesman Shen Danyang said, the Chinese government is firmly opposed to all types of commercial bribery, and any company, domestic or foreign, violating the country's laws will be penalized.
As far as the business environment is concerned, China like any other developing country has its share of problems. But that does not mean China tolerates business malpractices and will allow reputable multinationals like GSK to violate the country's laws.
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