Danone’s Dumex to Report Bribery Probe Results This Month

Danone’s Dumex unit pledged to reveal results of an internal probe within a week amid fresh allegations that it paid hospital staff in China to sell baby formula.

Dumex faced new claims by the state-run China Central Television yesterday that it paid about 500,000 yuan ($81,690) to hospital staff in the cities of Beijing, Tianjin, and five other Chinese provinces.

In yesterday’s report, the broadcaster cited documents provided by an unidentified person. This follows a separate CCTV report last week that Dumex paid hundreds of thousands of yuan annually in the various forms of “sponsorship fees” to doctors and nurses at hospitals in the northern Chinese city of Tianjin to sell its products amid fierce competition among baby-formula makers.

“A thorough investigation was launched a few days ago, and now it is still ongoing,” Athena Wang, a Shanghai-based spokeswoman for Dumex’s China unit, said by e-mail yesterday. “The report will be available before Oct. 1.”

The allegations follow others claiming doctors’ involvement in malfeasance amid China’s crackdown on corruption in the country’s $350 billion health-care market.

China extended the probe to multiple drug companies and hospitals after saying it was investigating GlaxoSmithKline Plc over claims that employees used cash and sexual favors to bribe doctors and health officials to promote sales of its medicines.

Dumex last week said it was “extremely shocked” by the initial Chinese media report on Sept. 16, which cited comments and documents from an unidentified former sales manager. Dumex adheres to Chinese laws and regulations and it has set up a “strict management system, including severe punitive measures” for activities that violate Chinese laws and regulations, the company said in a statement last week.

Precautionary Recall

In August, Danone was fined 172 million yuan by China’s top economic planning body for fixing prices of milk powder. That prompted it to cut prices for its products in the Asian nation by as much as 20 percent.

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. said the items might have been affected by a contaminated whey protein ingredient.

Danone’s baby-nutrition sales will fall in the third quarter because the recalls had a “significant” effect on sales in Asia, the company said last month.

Danone is the third-largest baby formula company in China, with a 9.2 percent market share last year, according to industry researcher Euromonitor International. Mead Johnson Nutrition Co. ranked first with a 14 percent share and Hangzhou Beingmate Group Co. was No. 2 with 10 percent, it said.

China is cracking down on possible misbehavior by companies. Alcon, the eye-care division of Novartis AG, said last week it is probing reports that its China employees paid doctors to boost sales. In July, China accused four senior Glaxo executives of crimes involving 3 billion yuan of spurious travel and meeting expenses as well as trade in sexual favors.

Sanofi and Eli Lilly & Co. were among drugmakers that subsequently said they were visited by Chinese regulators.

— With assistance by Liza Lin

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