China to Blacklist Health Firms Implicated in Bribery

China to Blacklist Health Firms Implicated in Bribery

Listed Companies to Be Barred for Two Years From Selling in the Relevant Province

LAURIE BURKITT

Updated Dec. 27, 2013 11:09 a.m. ET

BEIJING—China’s health regulators are rolling out a corporate blacklist for drug and medical-device companies implicated in commercial bribery, a move aimed at stamping out corruption in the country’s graft-ridden health-care sector.Beginning in March, the National Health and Family Planning Commission will publish on its website a record of medical-related manufacturers, agencies and individuals charged with bribery by courts, and sued, punished or investigated for bribery, the commission said in a statement on its website Friday. The statement also said that the agency reserved the right to place any company on the list for legal and regulatory violations.

Listed companies will be barred for two years from selling their products within the province in which they are implicated, the statement said. It said companies can apply as usual to sell their products in other provinces but will be at a disadvantage.Companies listed twice in a five-year period will be banned nationally for two years, the statement said.

The developments come amid a heightened state of scrutiny of China’s health-care industry.

The Ministry of Public Security in July accused U.K. drug company GlaxoSmithKlineGSK.LN +0.91% PLC of bribing doctors, hospitals and government officials in an effort to sell more drugs at higher prices. Glaxo has said it appears some of its managers in China might have broken the law, and says it is cooperating with the probe.

French food giant Danone SA BN.FR +1.43% ‘s baby-food arm Dumex Baby Food Co. announced in October it would overhaul management and marketing at its infant formula business in China following allegations by the official China Central Television that it paid hospital staff to use its products and boost sales.

The health commission’s list will show details such as the name, address and legal representative of bribery-connected manufacturers or individuals, as well as information on their alleged crimes, the statement said. It also said regional health departments will be required to report companies to central authorities within a month of any alleged offense.

Medical companies have in recent years flocked to the Chinese market, where a health-care overhaul has expanded access to services and boosted demand for pharmaceuticals and medical devices. The country’s health-care spending is expected to triple to $1 trillion by 2020 from $357 billion in 2011, according to consulting firm McKinsey & Co.

Yet the country’s hospital system, underfunded and strained, has historically been plagued by kickbacks and ripe for corruption. 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.

Health-care companies typically sell through multiple layers of distributors that are difficult to oversee, industry players say.

 

China to introduce healthcare corruption “blacklist” in 2014

Fri, Dec 27 2013

SHANGHAI, Dec 27 (Reuters) – China will introduce a blacklist of drugmakers and medical device manufacturers found to have paid bribes as it extends a crackdown on graft in the healthcare sector.

Healthcare departments will compile lists of offending manufacturers, agents and individuals, which will be published online, the National Health and Family Planning Commission said on Friday. The list will come into effect from the beginning of March.

Firms on the list once will be banned for two years from selling within the region where they were implicated. Those appearing on the list twice in five years will be banned nationally, also for two years.

Corruption in the healthcare sector has been in the spotlight this year with regulators investigating international and domestic drugs firms and milk powder companies for suspected graft.

The most high-profile investigation involved British drugmaker GlaxoSmithKline, significantly denting the firm’s China sales and spooking doctors more widely to reduce interaction with sales teams.

GSK has said some of its senior Chinese executives appear to have broken the law. It has also said it has zero tolerance for bribery, calling the allegations in China “shameful”.

With the country’s healthcare spending forecast to nearly triple to $1 trillion by 2020 from $357 billion in 2011, according to consulting firm McKinsey, China is a magnet for makers of medicines and medical equipment.

The blacklists will include those found guilty of relatively minor bribery but who may not have been punished by China’s courts, as well as those who have received administrative punishments from sector and financial watchdogs.

The blacklists will display the name of the manufacturer or agent, its business address and legal representative, as well as details of the alleged crime, the commission said.

Under the amended rules, regional healthcare departments will be required to report their lists to the central healthcare commission within a month. They will also need to give those it plans to list the right to query the ruling.

Any medical practitioners who receive bribes will also be punished, and in severe cases have their medical licenses revoked.

Corruption in China’s medical sector is fuelled in part by low base salaries for doctors and nurses at the country’s 13,500 public hospitals.