The Chinese government has accused pharma giant GlaxoSmithKline of paying $489m in bribes to doctors and lawyers in order to boost sales and profits. The payments were allegedly funnelled through a network of 700 travel agents and consultancies, and police are examining deals dating back to 2007.
What the commentators said
The charges are ugly, said James Moore in The Independent. Note, however, that GlaxoSmithKline isn’t the first major foreign firm “to find itself in the authorities’ cross-hairs”, and it probably won’t be the last. The state may just want to make sure foreign companies know who’s boss. And there may be “an element of nationalism, even protectionism” at work, given that local firms often struggle against major foreign counterparts “with recognisable brands and reputations”.
Big Pharma has no choice but to beef up operations in China as the West slows, noted Economist.com’s Schumpeter blog. Chinese health spending is expected to triple to $1trn in the next seven years. But this is an industry “with perfect conditions for bribery”. Hospitals are forced by the state to charge low prices yet have to cover most of their own costs. So they rely on drug sales for most of their profits, meaning that doctors, who are poorly paid, already have ample reason to prescribe pricey or inappropriate drugs.
Kickbacks are so endemic that it’s hard to see much changing, said John Foley and Edward Hadas on Breakingviews. Moreover, policing an industry requires “a large collection of honest and competent bureacrats [who] are in short supply”. Few expect a “new era of transparency”, agreed the FT’s Jonathan Guthrie. As one cynic put it: “If bribes were handed out, they obviously went to the wrong people”.
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