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China bribery probe leading to tough drug market, CEO says

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Marc de Garidel, CEO of French pharmaceutical firm Ipsen SA, said it’s becoming more complicated to do business in China as doctors change habits amid a widening local probe of the drug industry.

Drugmakers under investigation have stopped promoting products in China, and physicians in some hospitals no longer want to meet sales representatives, de Garidel said during a conference call with reporters Friday after his company published first-half earnings.

“In certain cities, in certain areas, there is a toughening of the marketing conditions,” he said. “We are monitoring this very closely. We don’t know how long it will last.”

The comments are the first sign that China’s investigation of bribery allegations against GlaxoSmithKline Plc is hurting business for drug companies.

Indianapolis-based drugmaker Eli Lilly and Co. also is facing allegations that its employees paid Chinese doctors at least $4.9 million in bribes and kickbacks.

A government crackdown against corruption in the $350 billion Chinese health-care market has extended to other foreign companies and local hospitals since the country announced the probe, which involves charges that Glaxo employees used cash and sexual favors to bribe doctors and health officials to promote sales.

Ipsen, the maker of a rival product to Allergan Inc.’s Botox wrinkle smoother, isn’t being investigated in China and hasn’t been visited by local authorities, de Garidel said.

The French company, based in Boulogne-Billancourt, just outside of Paris, has about 700 employees in China, with local headquarters in Beijing and a plant in Tianjin, in the northern part of the country. The drugmaker has been present in China for almost 21 years, Didier Veron, a spokesman for Ipsen, said in an email Friday.

Ipsen’s Chinese sales were affected in July and August, because of changing behavior among doctors, de Garidel said. The executive said it’s difficult to make predictions on how the situation will evolve.

China said last month it would punish 39 hospital employees for taking illegal kickbacks from drugmakers. The hospital staff received inducements totaling $460,000 from two pharmaceutical companies between January 2010 and December 2012, China’s official Xinhua news agency reported July 23, citing the National Health and Family Planning Commission.

Regulators will “severely crack down” on bribery, fake medication and forged documents, China’s Food and Drug Administration said last month. Bribery was one of the main reasons drug prices were falsely inflated in China, Gao Feng, head of the economic crimes investigations unit of the Public Security Ministry, said at a briefing on July 15.

Glaxo faces allegations it traded in sexual favors and had spurious travel and meeting expenses. Lilly, said last week it was investigating allegations its employees paid Chinese doctors in bribes and kickbacks. Paris-based Sanofi faces an investigation over similar allegations.

Simon Steel, a spokesman for Glaxo, didn’t immediately respond to an e-mail and a phone message seeking a comment on whether the U.K. drugmaker has stopped marketing its products in China because of the investigation. Laurence Bollack, a spokeswoman for Sanofi in Paris, said she had no immediate comment when contacted by telephone.

Glaxo said last month it will cooperate with authorities and that it is reviewing all third-party agency relationships and transactions with travel agencies. Sanofi, France’s largest drugmaker, said Aug. 10 it will will cooperate with any review of its business in China.

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