Tuesday, July 23, 2013

How to lower Big Pharma's drug prices the Chinese way

British drug giant GlaxoSmithKline (GSK) will lower the prices of its products on the mainland and has admitted that some of its senior executives appear to have broken the law there.

Meanwhile, the mainland's crackdown on pharmaceutical firms widened to AstraZeneca.

UK ministers are aware of the investigation. We remain in regular contact with GSK and the Chinese authorities

The Shanghai office of the Anglo-Swedish firm was visited by the Shanghai Public Security Bureau "regarding a local police matter focused on a sales representative", a spokesman for the company said. "This investigation relates to an individual case."

Shanghai is the China headquarters of AstraZeneca, which is listed in Stockholm, London and New York. Last year, the firm's revenue was US$27.97 billion.

Abbas Hussain, GSK's president for Europe, Japan, emerging markets and the Asia-Pacific, admitted during a visit to the mainland that "certain senior executives of GSK China … appear to have acted outside of our processes and controls, which breaches Chinese law".

Last year, GSK sacked 56 employees in China for violating its rules, out of a worldwide total of 312 dismissals, a source said.

Hussain said GSK, listed in London and New York, would change its business model in China, which would create price cuts for mainland customers.

The Ministry of Public Security said: "Some senior Chinese executives of GSK resorted to bribery to raise drug prices and increase sales to gain unjustified profits, which not only seriously violated Chinese law but severely harmed the interests of Chinese patients."

Vice-Premier Wang Yang called last week for accelerated reform of the administration of food and drugs, to eliminate illegitimate profits, and a severe crackdown on illegal activities that threaten the safety of food and drugs, according to the China Food and Drug Administration (CFDA) website. "Food and drug safety directly concerns the welfare of the people and social stability," Wang stressed.

Hussain said: "We fully support the efforts of the Chinese authorities in their reforms of the medical sector and stand ready to work with them to make changes for the benefit of patients in China."

At his meeting with police, Hussain "again apologised on behalf of GSK", the ministry said.

"UK ministers are aware of the investigation," said Matthew Forbes, the deputy British consul in Shanghai. "We remain in regular contact with GSK and the Chinese authorities."

Britain's Office of Fair Trading (OFT) is investigating GSK for allegedly striking deals with three companies, Alpharma, Generics (UK) and Norton Healthcare, that allegedly infringed competition law over the supply of the drug paroxetine in Britain, an OFT spokesman said, emphasising that this was unrelated to the investigation in China.

From July 15 to 31, eight mainland ministries, including the State Administration for Industry and Commerce, are conducting a crackdown on false advertising of drugs, the SAIC said yesterday.


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