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Danone, Novartis Units Probe Claims China Staff Paid Doctors

Sept. 18 (Bloomberg) -- Alcon, the eye-care division of Novartis AG, and Danone’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 yesterday, citing a whistle-blower nicknamed “Zorro.” Dumex said on Sept. 16 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 products.

Concerns that illegal payments to health-care workers are stoking medical costs prompted China to intensify a crackdown on kickbacks, with the health regulator saying yesterday medical workers may not promote formula sales. 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 yesterday. “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 on Sept. 16 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.

Commission Crackdown

China’s National Health and Family Planning Commission said medical workers are banned from promoting sales of baby formula that can replace breast milk and will be severely punished if breaking the rule, according to a statement published on the commission’s website yesterday.

Medical institutions are banned from taking sponsorships, kickbacks from baby formula makers and distributors, it said. Baby formula producers and sales are prohibited from promoting products in hospitals and clinics in any way. The commission made the statement in response to media reported violations by some medical institutions in Tianjin.

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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