Sunday, August 18, 2013

GlaxoChinaGate contd. - All aboard the Botox gravy train!


BEIJING—GlaxoSmithKline GSK.LN  PLC employees in China are said to have organized an all-expense-paid trip in May for a group of doctors to tour the scenic river town of Guilin, one of China's premier tourist destinations. The goal: Get Chinese doctors to begin prescribing the company's Botox medication, according to an anonymous tipster who alerted company executives.

Cui Lihua, a physician at Beijing's Bo'ai Hospital, was one of the more than 30 doctors invited on a three-day tour that included a trip to Elephant Hills and Seven Stars Park, attractions known for their lush natural settings and a chance to see wild monkeys. Though an itinerary reviewed by The Wall Street Journal didn't specify time for training, Dr. Cui says she learned a lot and received a lecture fee from Glaxo. She declined to comment on the fee, wouldn't provide details on the value of the trip and didn't respond to subsequent requests for comment.

Other trips allegedly went farther afield, to places as far-flung as Budapest and Greece, according to travel documents that the anonymous tipster sent to Glaxo executives that were later reviewed by the Journal. The tipster said such company-sponsored trips were part of a broader effort involving perks and cash—including 1,000 yuan, or about $160, honorariums and 2,000-yuan speaking fees—to get doctors to boost drug prescriptions.

A Glaxo spokesman declined to comment on the specific allegations.

Glaxo's conduct with doctors is now under investigation in China. Chinese officials allege, among other things, that Glaxo employees held fake conferences and funneled the money for expenses as bribes for doctors, hospital administrators and government officials to prescribe more drugs. Glaxo has said that some senior executives may have violated Chinese laws, and that it is cooperating with the probe.

The relationship between Glaxo and doctors shines a light on China's fast-growing but deeply underfunded medical system. Doctors are widely seen as underpaid, which makes them prime recipients of honorariums, which are legal, or illegal cuts of sales from drug companies, industry insiders say.

Some doctors seek speaking fees or make deals in which they get a 15% to 25% cut of the sales of drugs they prescribe, said Zhang Qiang, a Shanghai-based doctor who cited these practices as part of the reason he recently left the public hospital system to work in Shanghai's WorldPath Clinic International, a private clinic.

"Holding a red envelope is a kind of seduction, an addiction for many that becomes a habit," Dr. Zhang said, referring to doctors who routinely accept cash-filled red envelopes—a Chinese custom—from pharmaceutical sales representatives or distributors.

The honorariums and cuts from the sale of drugs contribute to higher drug costs industrywide and chronic overprescribing in China, according to the Chinese government—an assertion backed by analysts at consulting firm Bain & Co. and elsewhere.

Pharmaceutical companies say they have strict compliance rules. Eli Lilly LLY -0.99% & Co. says it has internal controls such as monitoring and auditing. AstraZeneca AZN.LN +0.22% PLC says the company, which monitors and audits its operations, requires all employees to have regular compliance training. Pfizer Inc. PFE -1.49% says its employees have mandatory training world-wide for compliance with corruption laws. Glaxo says it takes action when it finds corrupt behavior.

In a medical system mostly controlled by the government, doctors are considered civil servants—and are paid as such. Their paychecks range from as low as $470 a month, or roughly the salary of a waiter, to $1,250, according to consulting firm McKinsey & Co.

Surveys show deep dissatisfaction among doctors. In a 2011 Chinese Medical Doctor Association survey of 6,000 doctors, 95% said they were underpaid and 78% said they wouldn't want their children to study medicine.

Doctors cite a deterioration of patient trust and a number of violent incidents against doctors in recent years. Last year, according to official media, 18-year-old Li Mengnan stabbed to death a 28-year-old intern and wounded three other workers because he believed he had been denied medical treatment for a spinal condition. Mr. Li was sentenced to life in prison.

Part of the problem is a heavy workload. There were 1.49 physicians for every 1,000 people in 2011, up 22% from 2005, but the increase didn't match the jump in the workload, according to data from the Ministry of Health.

The U.S. had 2.4 doctors for every 1,000 U.S. citizens in 2010, according to the World Bank, while Germany had 3.7 doctors per 1,000 people.

For pharmaceutical companies, fewer doctors means more power to influence a higher number of patients, according to industry watchers. There are now more than 4,000 multinational and domestic companies that sell medicines in the country, according to KPMG. That is stiff competition in China, where drug companies act more like those of the 1970s in the U.S., when lavish drug junkets were part of the culture.

Drug-industry compliance problems—such as cuts from drug sales and perks to doctors who boost prescriptions—are by no means unique to China. These problems have surfaced for decades in the U.S., but several investigations in the U.S. have resulted in settlements and prompted the firms to beef up compliance. The Physician Payment Sunshine Act, a little-known segment of President Barack Obama's 2010 health-care overhaul, requires drug companies to report on a publicly accessible website the monetary value of gifts and payments to doctors and teaching hospitals.

Documents reviewed by The Wall Street Journal and interviews with doctors and sales representatives in China show a hard-driving sales culture. Influential physicians who prescribe medicine and can sway the orders of their hospitals' pharmacies are targeted individually. To find the powerful doctors, pharmaceutical companies use marketing departments and industry events, according to physicians. The drug companies then obtain personal data, such as mobile-phone numbers, and share them with sales staff.

According to the documents, once Glaxo had cemented relationships with doctors, sales staff struck deals with them, offering them payments of 100 yuan per prescription and special "rewards" for those doctors who sold the highest amount of drugs in a quarter. Documents didn't specify what rewards were offered. The documents directed sales representatives to meet with what they called "customers" every two weeks to assess progress. Glaxo officials declined to comment.

Glaxo representatives created spreadsheets calculating doctors' prescriptions by having them fill out case forms that asked detailed questions about patients' illnesses, drugs and doses prescribed to them, according to the documents. One spreadsheet from 2008 outlined 39 specialists' usage of a drug in a quarter that the tipster said was the anticonvulsant drug Lamictal. It showed that some doctors started prescribing the drug to up to 30 new patients in four months and the overall prescriptions for new patients jumped 22% in the quarter. Glaxo declined to comment.

Other documents showed that Glaxo employees used private email to communicate with each other, telling employees to find "important experts," pinpointing doctors who had signed up for industry conferences. The employees then aimed to entice the doctors with special perks, such as arranged travel—day excursions to temples, islands and parks. Glaxo didn't provide comment.

Many people in China are only now beginning to travel beyond their hometowns for the first time, which makes sightseeing beyond the hospital an enticing offer, according to health-care expert Jason Mann, who is based in Hong Kong.

For increasing its sales of Botox, Glaxo representatives targeted 48 doctors and planned to reward them with cash or continuing-education credits to fill hospital requirements, as described in the documents, and gave payments that ranged from roughly $245 to $490.

Zhang Zhiqiang of China Medical University's Shengjing Hospital, said Glaxo provided him with a consultation fee on the recent trip to Guilin. Dr. Zhang said he never took any cash from Glaxo. Instead, he said, the company had his identification number and was able to deposit Dr. Zhang's fee directly into his bank account. Dr. Zhang said he didn't look at how much Glaxo deposited. Dr. Zhang said he prescribed Botox and it was the only Glaxo drug he had ever used in his practice. Officials from Dr. Zhang's hospital were unavailable for comment.

Glaxo said the alleged behavior would be a breach of the company's governance, values and standards.

Ding Xudong, a doctor in the central city of Xiangyang's No. 1 People's Hospital, said he has never used a Glaxo drug, but that he learned a lot at the conferences he attended. "I feel deeply thankful for GSK," Dr. Ding said. He declined to comment further.

—Fanfan Wang in Shanghai, Yang Jie and Kersten Zhang in Beijing, and Jonathan D. Rockoff in New York contributed to this article.

Write to Laurie Burkitt at

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