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Continued: Accusation Glaxo paid Chinese doctors shines light on abuses in cash-starved medical system

  • Article by: JOE MCDONALD , AP Business Writer
  • Last update: July 31, 2013 - 11:15 PM

Four employees have been detained. Police say they are suspected of laundering money through travel agencies to conceal the payments and evade Glaxo's internal anti-bribery controls.

Glaxo has tried to distance itself from the scandal, saying the employees acted without its knowledge and violated its policy.

Also last month, a rival drug manufacturer, AstraZeneca PLC, said police visited its office in what the company believed was an investigation of one of its sales representatives.

Last year, New York City-based Pfizer Inc. agreed to pay the U.S. government $60 million to settle charges its salespeople made improper payments to health care workers in China and other countries.

Estimates of how much outside money doctors and others receive range from 30 percent to up to 10 times their salaries, according to Peking University's Liu. He said he and colleagues have tried to gather data but hospital employees refuse to cooperate.

Despite the scrutiny directed at foreign drug suppliers, their Chinese rivals probably are more active at spreading around such payments, said Liu.

"In general, people would say domestic companies actually practice this informal payment approach almost as a common marketing strategy," he said. "For multinationals, this is not a common marketing tool."

The financial strain of health care on families is so great that it is distorting China's economy.

Until recently, few had health insurance and families saved a big share of their income to pay for medical emergencies. That left less for consumer spending, hampering the Communist Party's efforts to nurture self-sustaining economic growth based on domestic consumption instead of exports and investment.

The latest scandal could increase pressure on Chinese leaders to speed up promised health reforms.

The ruling party is promising more health care spending as part of an expansion of social welfare aimed at spreading China's new prosperity to its poor majority. The government says state-provided health insurance has been expanded to cover 95 percent of people in China, up from less than 50 percent in 2006.

Following the accusations against GlaxoSmithKline employees, the chairman of a government health panel acknowledged the link between low spending and graft.

Beijing has imposed price caps on several hundred drugs deemed essential. But that gave hospitals that add a surcharge to medicine prices an incentive to use more of them. The Cabinet's planning agency launched an investigation in July of production costs at 60 Chinese and foreign suppliers in a possible prelude to issuing new price standards.

The government has promised to ban surcharges by hospitals to reduce incentives to overuse drugs.

Beijing also has promised to pay doctors more, but Peking University's Liu said bringing them into line with comparable professions could require doubling or tripling salaries.

Instead, some reformers are urging Beijing to adopt a U.S.- or European-style system in which doctors can work second jobs and open private clinics.

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