Danone, Novartis Units Probe Claims Staff Paid China’s Doctors

Alcon, the eye-care division of Novartis AG (NOVN), and Danone (BN)’s baby formula unit Dumex are probing reports that their China employees paid doctors to boost sales, amid a government crackdown on corruption in health care.

Alcon’s China unit diverted funds meant for post-marketing clinical studies on its lens implants to bribe doctors at more than 200 hospitals, the 21st Century Business Herald reported today, citing a whistle-blower nicknamed “Zorro.” Dumex said yesterday it would immediately start an investigation after a China Central Television report that the business made payments to doctors and nurses in Tianjin to help sell its products.

Concerns that illegal payments to health-care workers are stoking medical costs in China prompted the government to intensify a crackdown on kickbacks two months ago. Authorities said July 15 they’re probing GlaxoSmithKline Plc, which they have accused of using money and sexual favors to bribe doctors and health officials to boost the sale of its drugs.

“Corrupt practices among doctors, hospitals and drug companies in China have unnecessarily increased the burden on people trying to get medical services, so this is a very basic livelihood issue,” said Joseph Cheng, a political science professor at the City University of Hong Kong. Hitting out at the medical sector “can also help make the new leadership more popular,” he said in a telephone interview.

Inappropriate Activities

Alcon was meant to do research on six products in China, including Restor and Toric, implants that treat astigmatism, and spent more than 1.4 million yuan ($229,000) on the studies last year, the Business Herald cited “Zorro” as saying. One doctor received 45,000 yuan for recruiting 150 patients, according to the report, citing material from the whistle-blower.

“Alcon does not tolerate activities that are not in compliance with the laws and regulations in the markets where we operate,” the company said in an e-mailed statement today. “When any inappropriate activities are identified, we take swift remedial action.”

Dumex made payments ranging from several hundred yuan to about 10,000 yuan in various forms of “sponsorship fees” to hospital staff for product sales, according to the report by state-owned CCTV, which cited interviews and documents provided by an unnamed former sales manager from the Danone unit.

The baby formula maker said yesterday it was “extremely shocked by the CCTV report” and would start an immediate investigation, according to a Dumex statement forwarded by Danone spokeswoman Charlotte Pasternak.

China Difficulties

Both the parent companies are also facing other difficulties in China. On Aug. 13, a woman identified by the pseudonym Li Li claimed in a report in the Business Herald that she was asked by Basel, Switzerland-based Novartis to give doctors kickbacks in return for sales of a cancer drug.

Novartis is investigating the allegations by the former employee, who had made a compensation claim against the company, Eric Althoff, a company spokesman, said at the time.

Separately, Danone’s Dumex was fined 172 million yuan in August by the nation’s top economic planning body for fixing prices of milk powder. The French maker of Activia Yogurt and Evian water also issued a precautionary recall of its milk formula products last month after Fonterra Cooperative Group Ltd. warned of contamination in a whey protein ingredient.

To contact Bloomberg News staff for this story: Daryl Loo in Beijing at dloo7@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net; Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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