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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

« The NIH's Drug Repurposing Program Gets Going | Main | One GSK China Scandal Blends Into Another »

July 22, 2013

Update on the Bribery Scandal

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Posted by Derek

This Reuters story may be telling people everything they need to know in the first paragraph:

British drugmaker GlaxoSmithKline said on Monday some of its executives in China appeared to have broken the law in a bribery scandal, as it promised changes in its business model that would lower the cost of medicine in the country.

GSK is the latest in a string of multinationals to be targeted by Chinese authorities over alleged corruption, price-fixing and quality controls.

Chinese police visited the Shanghai office of another British drugmaker, AstraZeneca, a company spokeswoman said on Monday. They arrived on Friday and took away a sales representative for questioning, she said.

Will AstraZeneca cut its prices for China as well? In case some readers may think I'm drawing conclusions too quickly, well, the Reuters story draws them for you:

GSK's intention to cut the price of its medicines in China would be in line with how other foreign companies have responded to pressure from Beijing.

European food groups Nestle and Danone said they would cut infant milk formula prices in China after Beijing launched an inquiry into the industry.

"In China, when the government criticises people, they tend to bow down and apologise very quickly because they are scared of the authority of the central government to do tremendous harm to their business - whether it be for arresting executives very quickly or through auditing," said Shaun Rein, managing director of the Shanghai-based China Market Research Group.

Comments (11) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. anonymous on July 22, 2013 10:09 AM writes...

Here in the good old US of A, I think we call it blackmail.

Permalink to Comment

2. a. nonymaus on July 22, 2013 11:03 AM writes...

Not bribing people to prescribe overpriced drugs would count as "changes in its business model that would lower the cost of medicine in the country."
As for whatever's going on with AZ, it may be a shakedown, it may be that AZ reps were also slinging the baksheesh to stay competitive with GSK.

Permalink to Comment

3. Anon on July 22, 2013 11:12 AM writes...

Derek, you forgot the links!

"Hussain [President of Emerging Markets], sent to China last week to lead GSK's response to the crisis, held a meeting with the Ministry of Public Security at which he also promised to review GSK's business model.

"Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients,"

I think that is a pretty open and shut case. China finds they were using bribes (which was likely known much earlier and they let it continue to this level so they could leverage more against GSK), exec is sent to apologize, exec promises to lower the cost of drugs in time for Chinas next year of price negotiations. This guy James seemed to have predicted this:

www.fiercepharma.com/story/china-crackdown-it-designed-cut-healthcare-costs/2013-07-17

Permalink to Comment

4. Anonymous on July 22, 2013 11:55 AM writes...

@1: The only problem is that it happened in the good new China...and they called it cracking down on bribery. Take it or leave it...it is a free world. Whine does not work there unfortunately.

Permalink to Comment

5. newnickname on July 22, 2013 12:02 PM writes...

Some of us may recall when the Big Pharmas were all in on building new research (and sales) facilities in China. I forget which Big Player it was, but they were one of the first to start a major project. Their construction project was not proceeding as fast as they hoped. They couldn't get building permits and so on. They brought in a Chinese national (who I think had also worked in the US) who got things going. As he himself explained, his predecessors didn't understand how the system worked; rather, how to work the system. (I forget the term in Chinese.)

At that time (1990s onward), you needed to grease (bribe) every politician and bureaucrat to get anything done.

Now, they'll have to pay "bribes" (lower prices) to stay out of jail.

Permalink to Comment

6. bigbnc on July 22, 2013 12:31 PM writes...

The wild-west (or, east in this case) Chinese frontier will never align with US/EU pharmaceutical practices - not in anyone's lifetime at least... I love how Beijing goes after multi-national pharma companies first, demands lower drug prices and threatens international prosecution - all the meanwhile their own CMO's/CRO's are churning out all sorts of terrible products, API's and clinical data, not to mention the counterfeiting operations run by Chinese companies (some government backed) that aren't ever inspected, get a hand-slap if they get caught and set up another shop down the street when they want to make more money.

Here's the scary part regarding GSK in particular... The ploy by Beijing worked:

"After his meeting with China's Ministry of Public Security, Hussain pledged to cut the cost of GSK products in the country. "Savings made as a result of proposed changes to our operational model will be passed on in the form of price reductions, ensuring our medicines are more affordable to Chinese patients," he said" - FiercePharma 07.22.13

Permalink to Comment

7. dearieme on July 22, 2013 2:22 PM writes...

Your making the Chinese government and courts sound as biased against foreign firms as the American ones.

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8. mass_speccer on July 22, 2013 3:23 PM writes...

So are we supposed to believe that GSK and AZ have been bribing officials but everyone else has been playing by the rules entirely? Seems slightly hard to believe (doesn't mean its not true of course).

Permalink to Comment

9. newnickname on July 22, 2013 3:48 PM writes...

@8 mass_speccer: The example I cited about the need to bribe officials for building and other permits back in the 90s was mentioned in major press of the day (maybe even C&EN, with polite euphemisms). My guess is that extortion isn't equal opportunity; it's proportional to pocket depth. Why bother with nickels and dimes from the local noodle shop when you can get Big Bucks from the Big Boys who have much more to pay as well as much more to lose?

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10. Nick K on July 23, 2013 1:21 AM writes...

#6 Exactly right. The Chinese state plays hardball, as GSK and other Western firms are discovering to their cost.

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11. Anchor on July 23, 2013 6:06 AM writes...

The nation, we call it peoples republic of China is a rogue, a thief and thug of the highest order. That GSK/AZ bribed the hospital and the doctors may be true but then it happens all the time in China! The last time I checked China was and is a communist nation. Perhaps, the mistake GSK and AZ made-not paying bribe to those apparatchiks who controls the state. By highlighting these foreign companies, China wants to give an impression to its local population that it is tough on crime and bribe. Nothing could be farther from the truth. And the truth is in China they call it "killing the chicken and scaring the monkey". That is all to it!

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