Sunday, August 25, 2013

China Drugmakers Decline on Corruption Crackdown: Shanghai Mover

Jiangsu Hengru Medicine Co. shares fell the most in three months as drugmakers declined after the official Xinhua News Agency reported China is starting a campaign to crack down on illegal competition in the industry.

Jiangsu Hengru dropped 4.4 percent to 33.31 yuan at the 11:30 a.m. local-time break, poised for the biggest loss since May 20. Beijing SL Pharmaceutical Co. slid 4.1 percent to 56.57 yuan. A gauge of health-care companies fell 2 percent, the most among 10 industry groups on the CSI 300 index. The Shanghai Composite index and CSI 300 index were little changed.

"The crackdown on irregularities in the medical sector has undermined confidence among some investors and they expect drug prices to fall," said Wu Kan, a Shanghai-based fund manager at Dragon Life Insurance Co., which oversees $3.3 billion in assets.

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The campaign, which will last until the end of November, will target "commercial bribery" and "unfair competition" by companies abusing a dominant market position, Xinhua said, citing the State Administration for Industry & Commerce.

China has expanded its anti-corruption probe of pharmaceutical companies to drive down drug prices as it seeks to expand health care to the poor and uninsured. President Xi Jinping has made affordable health care a key part of the Communist Party's agenda.

The National Development & Reform Commission is already investigating 60 foreign and local pharmaceutical companies in relation to pricing, the China Daily reported separately.

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Authorities in the southeastern province of Fujian said 1,088 medical professionals from 73 hospitals were suspected of corruption after a six-month investigation, Xinhua reported on July 24. In southern Guangdong province, 39 employees of a hospital will be punished for taking illegal kickbacks from pharmaceutical companies, according to another Xinhua report.

Sanofi, France's largest drugmaker, said on Aug. 10 it will cooperate with a review of its business in China after a newspaper reported this month a whistle-blower's allegations that the company paid about 1.69 million yuan ($276,000) in bribes to 503 doctors in the country.

GlaxoSmithKline Plc, the U.K.'s largest drugmaker, is the subject of a corruption probe, and three other companies have been, or are in the process of being, examined by authorities. Johnson & Johnson was fined for monopolistic practices this month, while Eli Lilly & Co. was reviewed earlier this year by authorities in Shenyang, the company said on Aug. 1.

Authorities budgeted 850 billion yuan in April 2009 for an overhaul of the nation's health care system to reduce the costs of essential drugs and provide more than 90 percent of the population with basic health insurance. Spending in the three years since then had exceeded 1.1 trillion yuan, Xinhua reported in March 2012.

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