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China probes against foreign pharma unfair: EU business lobby

A Chinese national flag is seen in front of a GlaxoSmithKline office building in Shanghai, July 12, 2013. REUTERS/Aly Song
A Chinese national flag is seen in front of a GlaxoSmithKline office building in Shanghai, July 12, 2013. REUTERS/Aly Song

By Michael Martina

BEIJING (Reuters) - Foreign pharmaceutical firms in China have been unfairly targeted by a string of investigations into bribery and price-fixing despite generally strong legal compliance, a European Union business lobby said on Thursday.

A series of corruption and antitrust probes in recent months by Chinese authorities have left foreign firms jumpy as they try to get a handle on what has quickly become one of the most salient risks of doing business in China.

The biggest foreign firm in the spotlight is British drugmaker GlaxoSmithKline PLC, which Chinese police have accused of funneling up to 3 billion yuan ($489.92 million) to travel agencies to facilitate bribes to doctors to boost the sale of its medicines. The company has said some of its senior Chinese executives appear to have broken the law.

Bruno Gensburger, the chair of the European Union Chamber of Commerce in China's pharmaceutical working group, said the foreign companies that have been investigated all have global standard operating procedures (SOPs) and are "at large" very responsible in their China practices.

"What I feel is a little bit unfair is that the foreign companies which are most serious about SOPs have been the most investigated and the most discriminated. To my knowledge today, no Chinese company has been investigated," Gensburger told reporters at a briefing on the Chamber's annual position paper.

"We all want to work in a very clean environment. The question we ask today is if this campaign is aimed just to frighten some companies or create a special climate, I don't think it will solve anything," Gensburger said, adding that all of the drugmakers have fully cooperated with authorities.

The Chamber's president, Davide Cucino, said European companies would be satisfied if the cases are handled according to law and if there is a balanced focus on corruption within domestic firms in the Chinese press.

"We do not have to distance ourselves from the fact that there have been cases of corruption. European companies all have the interest that the anti-corruption crackdown goes on," Cucino said.

Health Ministry officials are investigating drugmaker Sanofi SA over bribery allegations. Chinese authorities have also visited sites operated by Danish drugmaker Novo Nordisk A/S, Danish firm H Lundbeck A/S, Britain's AstraZeneca Plc, U.S. firm Eli Lilly & Co and Belgium's UCB SA.

The investigations also underline the high prices in the pharmaceutical industry, as the government seeks to make healthcare access universal and faces an estimated $1 trillion healthcare bill by 2020.

Many Chinese prefer foreign brands, which often come at a premium, over local drugs because of the widespread circulation of fake medicine.

"THE STATE MUST STEP BACK"

Cucino said the lobby was worried about how China's antitrust regulators were using a 2008 anti-monopoly law, which some fear has been directed at multinationals.

"We believe that the law is there but a lot of guidelines ... on how to implement it are still not there, or at least are very unclear," he added.

Official media have said the probes are part of efforts to toughen enforcement of the law and are not just targeting at foreign firms.

In its paper, the Chamber said the government was making ongoing efforts to prop up state-owned enterprises at the expense of foreign companies.

Beijing's view on market access is "fundamentally anachronistic" the Chamber's paper said, noting that China need not protect its companies because it has demonstrated that they can compete with multinationals in all sectors.

"We believe that the state must step back," Cucino said, warning there could be implications for Chinese firms in Europe.

When asked about the Chamber's comments, Foreign Ministry spokesman Hong Lei said China was committed to improving the investment environment for foreign companies.

"At the same time we hope that relevant companies respect China's rules and laws while operating in the country," he told a briefing.

(Additional reporting by Ben Blanchard; Editing by Miral Fahmy)

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