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China to Punish Hospital Staff as Kickback Crackdown Widens

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July 24 (Bloomberg) -- China will punish 39 hospital employees for taking illegal kickbacks from drugmakers amid a widening investigation of corruption in the country’s $350 billion health-care market.

The hospital staff received inducements totaling 2.82 million yuan ($460,000) from two pharmaceutical companies between January 2010 and December 2012, China’s official Xinhua news agency reported yesterday, citing the National Health and Family Planning Commission.

Regulators will “severely crack down” on fake medications, forged documents and bribery, the China Food and Drug Administration said last week. China’s efforts to clean up its health-care market have included an investigation of GlaxoSmithKline Plc., the U.K.’s biggest drugmaker.

“This is another step forward as the government progresses in its medical reform plan,” said Jason Siu, a health-care analyst with RHB OSK Securities Hong Kong Ltd. “They’ve spent more than 800 billion yuan on health care since 2009 and they’re trying to streamline their procurement and subsidy costs.”

China’s government budgeted 850 billion yuan in April 2009 for a health-care overhaul to reduce the costs of essential drugs and provide more than 90 percent of the population with basic health insurance. Spending in the three years since then had exceeded 1.1 trillion yuan, Xinhua reported in March 2012.

Union Chairman

In the crackdown on the hospital workers, nine doctors who directly received kickbacks were dismissed, suspended or had their licenses revoked, according to the report. Cases involving the vice chairman of the hospital’s trade union, along with two people in charge of two pharmaceutical companies involved, have been transferred to the judicial system for handling, Xinhua reported, without identifying the drugmakers.

Glaxo faces allegations it traded in sexual favors and had spurious travel and meeting expenses amounting to 3 billion yuan, the ministry said last week.

Bribery was one of the main reasons drug prices were at a falsely high level in China, Gao Feng, head of the economic crimes investigations unit of the Public Security Ministry, said at a briefing on July 15.

Abbas Hussain, Glaxo’s head of emerging markets, said after meeting with government officials in Beijing that some employees may have broken China’s laws. He pledged to make corporate changes that will deliver cheaper medicines, according to an e-mailed statement from the company dated July 21.

AstraZeneca Plc, the U.K.’s biggest drugmaker after Glaxo, said July 22 that an employee was the focus of a “local police matter” in Shanghai. There’s “no reason” to believe the individual case is related to any other investigations, the London-based drugmaker said.

An AstraZeneca employee in Shanghai is under police investigation on suspicion of hacking into computer systems, the official People’s Daily reported today. Three messages left today at the public relations department of the company’s China offices weren’t returned.

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

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

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