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Sinopharm executives face corruption probe in China

Two employees said to be detained for misappropriating company funds
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China's investigation of the pharmaceutical industry zeroed in on domestic manufacturer Sinopharm this week, with two senior executives of the firm under scrutiny.

Chinese authorities detained former VP Shi Jinming last week, just days after Sinopharm announced he was to step down from his role for personal reasons.

Local news reports suggest he and another executive called Xu Yizhong, general manager of a Sinopharm subsidiary, stand accused of misappropriating company funds and diverting cash into personal accounts.

State-owned Sinopharm is one of the largest China-based pharma companies to be drawn into the investigation of alleged corruption in the pharma sector in recent months, which has also embroiled leading drugmakers such as GlaxoSmithKline (GSK). Last July, GSK was accused of paying about $500m in bribes to promote sales of its products in China.

The investigation has already had a major impact on the way GSK carries out its sales and marketing activities around the world, and last month the company did away with individual targets for reps based on product sales, instead rewarding staff based on the overall performance of GSK's business and individual measures such as technical knowledge.

Other pharma companies drawn into the investigation in the intervening months have included Novartis, Lilly and Sanofi.

In a statement, Sinopharm insisted the investigation would have no impact on its operations and said it had set up a committee to examine its internal corruption controls. Another domestic company - Shanghai Pharmaceutical - also announced recently that it was under investigation for allegedly paying bribes to boost drug sales.

Sinopharm has been in the spotlight of the Chinese authorities from the time the wide-ranging investigation got underway last year, although the multinational pharma companies have received the most media attention. The authorities are looking at a broad range of corrupt practices, including payment of kickbacks, inflated drug pricing and fraud. 

Commenting on the latest events, risk-management specialist Suzanne Fribbins of the British Standards Institution (BSI) noted that China is ranked 80th out of 175 countries in an index of perceived levels of public sector corruption in around the world.

"Today's events, and those in preceding months, show that the Chinese authorities are taking this seriously," she noted, adding it is a "wake-up call for organisations to the importance of having clear policies and adequate procedures in place to prevent corrupt practices."

14th January 2014

From: Sales, Regulatory

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