China’s biggest drug distributor says two former executives are the target of a corruption investigation, widening a graft probe that has focused on foreign pharmaceutical makers

Chinese drug company targeted in corruption case

By Associated Press, Updated: Monday, January 13, 1:08 PM

BEIJING — China’s biggest drug distributor says two former executives are the target of a corruption investigation, widening a graft probe that has focused on foreign pharmaceutical makers.A former vice president of state-owned Sinopharm Group Ltd., Shi Jinming, was detained last week by Shanghai prosecutors for “an investigation in relation to an allegation of corruption against him,” a company statement said. It said Shi resigned in December for unspecified personal reasons.

Xu Yizhong, who was a general manager of a Sinopharm subsidiary, also is involved in the investigation, according to the statement released Sunday through the Hong Kong stock exchange. It gave no details of the accusations against the two men.

The announcement follows investigations last year of foreign drug makers on suspicion of paying doctors or other hospital employees to encourage use of their products.

In the highest-profile case, four employees of GlaxoSmithKline PLC were detained. GSK said the employees acted without its knowledge and last month announced an overhaul of its global marketing. It promised to stop paying doctors to promote its products at speaking engagements and scrapped individual sales targets.

Rival drug maker AstraZeneca said one of its executives also was detained by investigators. No further details of that case have been released.

The Chinese leadership that took power in late 2012 has promised to improve China’s health system and rein in surging costs of medicine and medical care that are fueling public frustration.

Chinese health researchers say informal payments to low-paid doctors and hospital employees by patients are common in the state-run hospital system.

Despite the scrutiny of foreign drug makers, researchers said their Chinese rivals probably are more active in handing out such payments because global companies often have controls in place to stop such bribery.

Sinopharm, also known as China National Pharmaceutical Group Corp., is the country’s biggest distributor of drugs and health care products and also has interests in manufacturing and research.

The company is controlled by a Cabinet agency, the State-owned Assets Supervision and Administration Commission, which oversees China’s biggest government companies.

 

January 13, 2014 2:17 am

Sinopharm executives targeted in China corruption probe

By Patti Waldmeir in Shanghai

China’s largest drug distributor has become the most prominent domestic target in a corruption probe into the promotional methods of several foreign pharmaceutical companies.

Sinopharm, the state-owned Chinese drug group, said in a statement to the Hong Kong stock exchange on Sunday that two former senior executives were under investigation for corruption, one of whom was detained by police in Shanghai on Friday night.

Shi Jinming, the former vice-president who tendered his resignation on December 29 for “personal reasons”, was detained “for an investigation in relation to an allegation of corruption against him”, the statement said. It gave no further details. A former general manager of a Sinopharm subsidiary is also involved in the investigation, the statement said.

The company said it had formed a committee, led by the company’s chairman and president, to review the group’s internal controls.

China’s pharmaceutical industry has been under scrutiny for the way it markets drugs to mainland hospitals and doctors since July when GlaxoSmithKline, the UK drugs company, was accused of paying up to $500m in bribes to promote drug sales.

Last month GSK responded by altering the way that it pays staff in China and around the world, scrapping individual sales targets for commercial staff and eliminating bonuses linked to the use of its medicines by prescribers visited by sales representatives promoting its drugs.

The move was widely viewed as a response to the China scandal, though Andrew Witty, chief executive, said the reforms had been in the works for a long time.

Drug industry analysts in China have long said that corrupt practices were most rampant among domestic drug distributors in China, and foreign pharmaceutical executives have complained that they were targeted for investigation more intensively than domestic companies whose practices were worse.

Local lawyers and drug analysts say that domestic companies have also been investigated, and now Sinopharm, one of the biggest local players, has made this investigation public.

Rival Shanghai Pharmaceutical also announced recently that it was investigating an allegation in local media that a subsidiary paid bribes to staff at 31 hospitals to boost drug sales.

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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