China Steps up Anti-corruption in the Healthcare Sector

Credit: Visual China

BEIJING, Aug 8 (TiPost) —— With the convening of the national video conference on the anti-corruption in the healthcare sector recently, China has started a nation-wide crackdown on corruption that involves hospitals and pharmaceutical companies.

At least 155 hospital directors and committee secretaries of the Communist Party of China have been investigated this year, according to incomplete media statistics. The figure in the year to date was two times as many as that in the entire 2022. The Central Commission for Discipline Inspection (CCDI) has exposed that the People’s Hospital of Pu’er City, Yunnan Province, purchased a medical instrument for 35.2 million yuan, and its president, Yang Wenjun, took kickbacks of as much as 16 million yuan.

The anti-corruption campaign is set to clean up every corner of the healthcare industry. The actual controllers of two listed pharmaceutical companies have been probed in July alone.

A special audit of the production, distribution, and use of pharmaceuticals and high-value medical consumables in Guangdong Province (excluding Shenzhen) shows that three drug manufacturers, Livzon, Apic Hope Pharmaceutical, and Yifang Pharmaceutical, paid fees to 1,936 third-party business promotion companies from 2021 to May 2023, and extracted funds of 4.077 billion yuan in the name of service fees and other expenses, increasing the comprehensive cost of drugs and pushing up the ex-factory price.

In addition, there have been several Grade-A tertiary hospitals that issued a document, requiring doctors to report five years of lecture fees, academic conference costs, etc., which means that the Chinese regulators have the determination to completely break the chain of corruption.

The anti-corruption campaign has also extended to the capital market.

Recently the SSE put forward four major concerns relating to medical enterprises that float IPOs, in particular sales promotion activities by the intermediary organization. Various types of promotional activities must be carried out with legal compliance. The authenticity of the costs and completeness of various types of promotional activities should be ensured. The internal control system of various types of promotional activities must be effective. The connection between distributors, promotional services providers, the issuer and its related parties should be watched closely, and the fairness of the transaction should be guaranteed.

Due to the crackdown on corruption of the Chinese medical industry, pharmaceutical stocks fell across the board yesterday. In the face of tumbling stock prices, there have been more than 20 listed companies responded to the anti-corruption. Most pharmaceutical companies emphasized that the company has been operating in compliance, and anti-corruption has a relatively small impact on the company. Some pharmaceutical companies also pointed out that the anti-corruption is a necessary process for the industry to return to normal order, which is conducive to the long-term development of the industry.

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