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China has become stricter about corruption allegations against the pharmaceutical sector (especially against the big global pharmaceutical companies), which has enjoyed easy growth in the country so far.

A recent report from Reuters announced that last year the 60 Chinese healthcare companies, included in their survey, saw average profit margins decline to around 10 percent, from 15 percent in 2012. The source reports that net profits also fell to 2.1 percent in 2013, to result in an overall 20 percent reduction, compared to previous years.

Previously, China has been an attractive market for Big Pharma companies. Large drugmakers in particular have been experiencing a decreasing in both Europe and the United States and have relied on the emerging markets in China to drive their growth.

China has been cracking down on corruption in the pharmaceutical industry, this has resulted in numerous investigations into artificially high drug prices as well as bribery allegations, the most recent of which includes a probe into GlaxoSmithKline’s China unit and Roche Holdings Ltd.

Chinese officials have recently visited Novartis AG, AstraZeneca Group Plc, Sanofi SA, Eli Lilly & Co., and Bayer AG all as part of a series of investigations into the pharmaceutical industry in China. As a result of the GSK investigation, the company has since overhauled its management structure and changed the way in which it incentivizes sales for its drug representatives.

Industry and legal sources said that investigations into the sector are likely to grow intensively, which means that pressures on profits are likely to remain.

The intense climate created by the investigations also means physicians may be less inclined to meet with pharmaceutical representatives for fear of the meetings may place them under scrutiny from China’s government, putting yet another damper on sales growth.

The gLAWcal Team

Thursday, May 29, 2014

(Source: Reuters)

This news has been realized by gLAWcal—Global Law Initiatives for Sustainable Development in collaboration with the University Institute of European Studies (IUSE) in Turin, Italy and the University of Piemonte Orientale, Novara, Italy which are both beneficiaries of the European Union Research Executive Agency IRSES Project “Liberalism in Between Europe And China” (LIBEAC) coordinated by Aix-Marseille University (CEPERC). This work has been realized in the framework of Workpackages 4, coordinated by University Institute of European Studies (IUSE) in Turin, Italy.