The charges lodged against senior managers at the UK’s GlaxoSmithKline recently have rightly been high-up the list of recent news articles both within China and elsewhere. The accusations being investigated by the Chinese authorities are that GSK drugs sales agents and managers were bribing doctors in hospitals to buy and prescribe GSK drugs over their competitors’. These are certainly serious charges, but are they really that surprising?

The Chinese government has been attempting to reform the way primary healthcare institutions (hospitals and healthcare centers) are funded in the country. Since 2001, government spending on healthcare has grown massively, with its share of total healthcare investment almost doubling, helping to cut the proportion of out-of-pocket healthcare expenditure by individuals by nearly half.

Part of the new healthcare funding plan is to separate medical service provision from pharmaceuticals sales, as was discussed at length in Mintel’s report “Pharmacy Retailing in China, September 2012”. The government aim in this is to fund healthcare centres so that doctors and administrators no longer need to rely on the profits they make on drugs sales to fund their services.

This funding situation led to drugs companies (particularly foreign ones) being able to inflate drugs prices to increase margins. It also created a situation where doctors’ drugs purchasing decision were based on which companies gave them the best deals, rather than based on clinical need. The funding system also bred corruption, with doctors accepting bribes from drugs company sales agents to place orders, and prescribing more expensive drugs to consumers, whether these drugs were right for their clinical conditions or not.

This situation had to change. Not only has the government ramped up healthcare spending, and begun changing the rules regarding how healthcare institutions buy and prescribe drugs, but it has also initiated serious efforts to root out corrupt practices in the healthcare market, which also create the potential openings for fake drugs to get into the system.

So, it was really no surprise that eventually the authorities would seek to take action against drugs company sales agents. By targeting one of Big Pharma’s biggest players, the authorities are sending a clear message to the whole industry… “Clean up your act, or we’ll be coming after you next!”

 

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