INTERVIEW: Chinese bribery crackdown far from over
This article was originally published in Scrip
While things may appear to have gone quiet regarding the bribery probes in the Chinese pharma sector, the reality is that the government and provincial authorities are continuing to crack down and will do so for years yet.
International media reporting on the affair has died down on the lack of new disclosures in cases involving major foreign multinationals, notably GlaxoSmithKline, but this should not be taken as a slowing of official activity.
"In fact there were several detentions last month at a Chinese pharma firm in Hubei province, and the signs are that anti-bribery efforts are now clearly going well beyond multinationals," Sammy Fang, the head of the litigation and regulatory group at the Beijing office of international law firm DLA Piper told Scrip in an interview.
Among the Chinese already firms caught up in the probes are insulin analog manufacturer Gan & Lee Pharmaceutical, which last year began investigating allegations of kickbacks to doctors to promote the use of its products, and huge state-owned distributor Sinopharm Group, which more recently has seen two ex-senior executives come under scrutiny (scripintelligence.com, 14 January 2014).
In an interview, Mr Fang said that it was still not clear what specific actions or penalties might be brought in any of the cases. But the tougher rules on corruption in China – and high-profile antitrust cases elsewhere – were having an effect even before the investigations broke around the middle of last year, he noted.
Against the background of stricter anti-bribery legislation in the US and the UK, "many multinationals were actually tightening oversight in China before this period, and updating training policies and internal controls."
Observers have pointed out that one issue that remains to be clarified in investigations of multinationals' promotional practices in China is how any irregular activities could take place despite clear and strict internal corporate guidance on ethical behavior and corruption.
While declining to comment on specific measures within individual firms, Mr Fang said that: "One lesson that has come out of the whole affair is the value of having on-the-ground, dedicated compliance officers, who can adapt corporate rules to local conditions where necessary."
A number of firms have also appointed counsel for China compliance issues, he observed.
Many foreign pharma companies in China are said to have voluntarily reigned in their promotional practices in the wake of the actions, with GSK for example adopting a new local payment and incentive scheme for its sales force in January, as part of a global move to scrap individual sales targets.
The probes have also meant that "many hospitals and doctors are also reviewing their practices and guidance for interaction with sales reps," Mr Fang added.
The lawyer highlighted recent moves by China's National Health and Family Planning Commission to curb corruption through a blacklist system to be introduced in March, which could bar firms from participating in regional procurement tenders (scripintelligence.com, 6 January 2014).
"On top of this, local prosecutors' offices are planning to conduct detailed monitoring and audits of firms for at least the next three years," signaling a long-term commitment to stamping out corrupt practices, he observed.
More broadly, Mr Fang sees a confluence of factors behind the wider push by the central government in China to attack corruption across all sectors, and increasingly within its own ranks. "Socio-political factors are certainly playing a part. There is public pressure on President Xi [Jinping] to show that he is reigning in bribery and part of it is that he is also looking to consolidate his position."
In the healthcare system, there is also high-level concern about how corrupt practices may be adding to financial costs, for example through the unnecessary prescribing of drugs that have been promoted by illegal means. "Given the expansion of China's national health insurance schemes and the resources required for this, there is seen to be a need to control rising costs," Mr Fang said.