Bribery scandal dents Big Pharma sales in China, GSK hardest hit

Bribery scandal dents Big Pharma sales in China, GSK hardest hit

SHANGHAI/LONDON - A crackdown on corruption in China's pharmaceutical sector has hurt sales at international and local firms, with many doctors at Chinese hospitals refusing to see drug representatives for fear of being caught up in the widening scandal.

Britain's GlaxoSmithKline Plc, the group at the centre of the furore, has suffered the most. Industry insiders expect its China drug sales growth to slow sharply or even reverse in the third quarter after a 14 per cent year-on-year rise in the three months to end-June.

But GSK - accused by Chinese police in July of using travel agencies as intermediaries to make illegal payments to doctors - is not alone, and a number of companies say their China sales in the second half of the year may take a substantial hit.

With the country's healthcare spending forecast to nearly triple to $1 trillion by 2020 from $357 billion in 2011, according to consulting firm McKinsey, China is a magnet for makers of medicines and medical equipment.

However, a string of investigations and visits by authorities to the China-based offices of global firms has sent a chill through the industry, prompting businesses to step up internal compliance and rein in sales teams.

Corruption in China's healthcare industry is fuelled in part by low base salaries for doctors at the country's 13,500 public hospitals, the main buyers of drugs.

"There is an awful lot of confusion out there," the chief executive of French drugmaker Sanofi SA, Chris Viehbacher, told a conference in London last week.

"There was more of an impact in August and we are seeing less of an impact in September, but I think you will probably find, for at least the next couple of months, turbulence in the marketplace in some sectors."

Pharmaceutical sales staff said their hospital visits had been slashed - both because sales reps are struggling to get access to doctors and because firms are playing it safe.

The cutback in promotional activities has forced a number of drug companies to scrap monthly or quarterly sales quotas.

"There's a fall in sales for sure," said a Shanghai-based sales rep at GSK, who declined to be identified because he was not authorised to speak to the media.

"Because of the current situation and rumours about peers being taken away by authorities, we're going into hospitals less and less. We're worried the same may happen to us," he said, adding the lull in work meant he was spending more time drinking tea and worrying about redundancy.

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