China Probes Tetra Pak for Abuse of Market Control; China Probes 60 Drugmakers in Effort to Curb Drug Prices

China Probes Tetra Pak for Abuse of Market Control, Xinhua Says

China is probing Switzerland-based food-packaging company Tetra Pak Group for possible abuse of market dominance, the official Xinhua News Agency reported today, citing the State Administration for Industry & Commerce.

The market watchdog has organized more than 20 of its regional agencies to investigate the allegations, Xinhua said without giving further details. Three telephone calls to the watchdog’s press office in Beijing weren’t answered. Calls to Tetra Pak’s Shanghai office were also not answered.The investigation into Tetra Pak is the latest sign of increased scrutiny into the operations of overseas companies in the world’s second-largest economy. Nestle SA (NESN) and Danone’s (BN) infant-nutrition units are cutting some prices after the People’s Daily reported July 2 that the government started probing possible price-fixing by global producers.

Tetra Pak has factories in cities including Beijing, Foshan, Kunshan and Hohhot. China’s National Development and Reform Commission, the top planning agency, started an investigation into the pricing of infant formula sold by Nestle’s Wyeth and other foreign companies including Mead Johnson Nutrition Co (MJN), Abbott Laboratories (ABT), Dutch producer Royal FrieslandCampina NV and local company Biostime International Holdings Ltd (1112), according to the People’s Daily.

The commission is also examining the costs and prices of drugmakers including GlaxoSmithKline Plc (GSK), Merck & Co., Novartis AG and Baxter International Inc. (BAX) to improve the pricing system for medicines, it said on July 2

To contact Bloomberg News staff for this story: William Bi in Beijing at wbi@bloomberg.net

China Probes 60 Drugmakers in Effort to Curb Drug Prices

China’s top economic planning agency is investigating the costs and prices of drugmakers including GlaxoSmithKline Plc (GSK), Merck & Co., Novartis AG (NOVN) and Baxter International Inc. (BAX) to improve the pricing system for medicines.

The National Development and Reform Commission will examine 27 companies for costs and 33 for pricing, according to a July 2 statement posted on the commission’s Evaluation Center of Drug Pricing. The investigation is being done so that drug prices can be adjusted in a more timely fashion, it said.

“This isn’t surprising as drug prices are often under scrutiny from the NDRC,” said Jason Siu, a health-care analyst with RHB OSK Securities Hong Kong Ltd. “It makes sense for them to try to keep procurement costs low.”

A possible impetus for the commission to probe pricing and costs of domestic and foreign companies was the publishing of China’s national essential drugs list in March, which increased the items on the list to 500 from 305, Siu said in an interview yesterday. The study comes after the People’s Daily reported the NDRC started an investigation into pricing of infant formula.

Drugs on the list are subsidized and purchased in bulk by provincial governments. The items include what every hospital should have on its pharmacy shelves, Siu said, and doctors are urged to prescribe from the list as patients are more likely to receive reimbursement.

Officials from the center will visit the companies between July and October, according to the statement. GlaxoSmithKline, Merck, Novartis, Baxter and Astellas Pharma Inc. (4503) are in the cost part of the review, along with a number of Chinese drugmakers, it said.

Chinese police started an investigation into the Chinese unit of Glaxo, U.K.’s biggest drugmaker, a week ago. Senior executives at the unit are suspected of “economic crimes,” the police have said.

There is no link between the investigation and the NDRC review, according to a person familiar with the matter.

To contact the reporter on this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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