Thursday, August 15, 2013

China to Launch Fresh Probe of Drug-industry Bribery

China is intensifying its investigation into rampant bribery in the pharmaceutical and medical services sector with a fresh three-month probe slated to begin on Thursday, the official Xinhua news agency reported.

The investigation by the State Administration for Industry and Commerce (SAIC), a regulator in charge of market supervision, is aimed at stamping out bribery, fraud and other anti-competitive practices in various sectors, Xinhua said.

It comes as other Chinese regulators such as the National Development and Reform Commission (NDRC) and the police conduct multiple investigations into how foreign and domestic companies do business in the world's second-biggest economy.

Much of the focus has been on the pricing of items from medicine to milk powder and whether companies are violating a 2008 anti-monopoly law.

"It seems that the NDRC and SAIC have learned from their recent experience that they have the power to force companies to change their practices and bring prices down," said Sebastien Evrard, Beijing-based partner at law firm Jones Day, which specializes in anti-trust law.

"They seem to be willing to exercise their powers in even more sectors that directly concern consumers."

The SAIC would hand down severe punishment for bribery found in the bidding process for drugs and medical services as that hurt the interests of the Chinese people, Xinhua said.

Corruption in China's pharmaceutical industry is fueled in part by the low base salaries for doctors at the country's 13,500 public hospitals.

"Commercial bribery not only leads to artificially high prices, it undermines market order in terms of fair competition and corrupts social morals and professionalism," Xinhua said.

The NDRC, which oversees pricing, is already investigating 60 foreign and domestic pharmaceutical firms over their pricing practices. This investigation has yet to conclude.

Separately, the SAIC said it wanted to prevent China's industry associations from being the "driving force", or organisers, of monopolistic behaviour, an official at the SAIC, Cao Hongying, was quoted by Xinhua as saying.

Among the 12 monopoly cases that China has announced, nine of them were organized by industry associations, Xinhua said.

The investigations underline China's toughening stance on corruption and high prices in the pharmaceutical industry, as the government seeks to make healthcare access universal and faces an estimated $1 trillion healthcare bill by 2020.

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