The anti-corruption of medicine is still being strengthened. From the perspective of enterprises, according to incomplete statistics from Zhongxin Health, since 2024, the number of executives of pharmaceutical companies who have been officially notified to be investigated has been at least 14. In the past month alone, five executives of pharmaceutical companies have been investigated.
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A number of pharmaceutical companies broke out in corruption nests
Experts warn to pay attention to executive personnel trends
On the evening of the 8th, according to the Economic Observer, Yunnan Baiyao Group Co., Ltd. (hereinafter referred to as "Yunnan Baiyao") broke out in the nest case, and five former executives of the company, including Wang Minghui, the former chairman, and Yin Pinyao, the former chief operating officer and senior vice president, were taken away for investigation by the Commission for Discipline Inspection and Supervision from the beginning of 2023 to the beginning of 2024 because they were involved in the same matter.
In response to this news, Yunnan Baiyao replied to the media that the company had not received any information in this regard, and the listed companies disclosed information in accordance with relevant laws and regulations.
Zhongxin Health has noticed that corruption cases have occurred frequently among pharmaceutical companies, which has aroused widespread concern. For example, last year, Shanghai Pharmaceutical Group Co., Ltd. (hereinafter referred to as "Shanghai Pharmaceutical") had a big "personnel earthquake", and in just 3 months, 6 executives were investigated successively.
At the beginning of May this year, the Shanghai procuratorate prosecuted Zhou Jun, the former president of Shanghai Industrial (Group) Co., Ltd., on suspicion of corruption and bribery. According to public information, Shanghai Pharmaceutical is a pharmaceutical company under Shanghai Industrial. In September 2016, Zhou Jun was appointed as Vice Chairman and President of Shanghai Industrial (Group) Co., Ltd.; From October 2016 to November 18, 2023, he served as the chairman of Shanghai Pharmaceutical.
In addition, on April 16 this year, the discipline inspection and supervision team of China General Technology (Group) Holding Co., Ltd. also announced that two former executives of Hubei General Pharmaceutical Co., Ltd., a subsidiary of China Pharmaceutical and Health Industry Co., Ltd., were investigated. They are, Dai Xuhui, the former chief financial officer of Hubei General Pharmaceutical Co., Ltd., and Wang Jian, the former general manager of Hubei General Pharmaceutical Co., Ltd.
Li Cenyan, director of Beijing Zhijin Law Firm, which focuses on the compliance of pharmaceutical companies, analyzed to Zhongxin Health that the case of pharmaceutical companies is closely related to the business model of the pharmaceutical industry. Bribery often rises from the individual to the company or even group level, forming a top-down or bottom-up chain, increasing the likelihood of uncovered cases. At the same time, the bribe-taker usually involves hospital management such as the president, vice president, as well as doctors and pharmacist committee members, etc., who play a key role in the process of bringing drugs into the hospital and increasing the dosage, thus forming a series of corruption incidents around drugs.
Among the executives of pharmaceutical companies investigated, some have left their original companies before. For example, on April 29, Hisun Pharmaceutical announced that it received a letter from the State-owned Assets Supervision and Administration Office of the People's Government of Jiaojiang District, Taizhou City, that Li Yan, the former director and former president of the company, was suspected of embezzlement, embezzlement, bribery, and bribery of non-state employees in the company's agency business from 2019 to 2022, and the relevant departments are currently in the process of investigation. This is only about one year after Li Yan resigned from Hisun Pharmaceutical.
Li Cenyan reminded that due to the impact of pharmaceutical anti-corruption, the appointment and dismissal of senior management of pharmaceutical companies is no longer just an internal affair of the company, but also reflects the compliance risks faced by enterprises and changes in the market environment. This personnel change is not only related to the company's day-to-day operations and strategic adjustments, but may also indicate the future direction and potential challenges of the company.
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Strictly investigate commercial bribery
The crime of bribery may become the focus of anti-corruption in the near future
Zhongxin Health noticed that many of the executives of these pharmaceutical companies who have been investigated recently are suspected of bribery. In August last year, various provinces and cities successively publicly solicited clues on commercial bribery in the pharmaceutical field, covering all illegal acts of pharmaceutical companies, distributors, medical institutions and related staff, and the deadline was mostly set for June 2024. It is generally believed in the industry that in the near future, the focus of pharmaceutical anti-corruption work may be implemented in the punishment of bribery crimes.
On April 28, Liang Xiaobing, the legal representative and executive director of Huixin Medical (Guangdong) Co., Ltd., was notified of the suspected crime of bribery and is currently under supervision and investigation by the Zhuhai Municipal Supervision Commission.
In the pharmaceutical industry, taking risks for the sake of bribery is a stubborn disease. On April 23, Liaoning Baifeng Pharmaceutical Co., Ltd. (hereinafter referred to as "Baifeng Pharmaceutical"), a company listed on the New Third Board, disclosed that in 2023, three executives of the company were criminally detained on suspicion of false invoicing, involving four subsidiaries of Baifeng Pharmaceutical. The case is currently pending.
In order to crack down on commercial bribery, in September 2020, the National Health Insurance Administration issued the "Guiding Opinions on the Establishment of a Credit Evaluation System for Pharmaceutical Prices and Recruitment", requiring all localities to establish and implement a credit evaluation system for pharmaceutical prices and procurement by the end of 2020.
The credit rating of price procurement is mainly determined based on the severity of the amount of bribes, unfair price behavior, and disruption of the order of centralized procurement. For example, a single bribe of more than 10,000 yuan is considered "average", a single bribe of more than 100,000 yuan is considered "moderate", a single bribe of more than 300,000 yuan is considered "serious", and a single bribe of more than 2 million yuan is "particularly serious".
Based on the credit rating of the pharmaceutical enterprise, measures such as reminding and admonishing the enterprise, reminding the risk, disclosing information on untrustworthiness, and even restricting or suspending the enterprise's involvement in the case or all drugs and medical consumables are on the network, bidding or distribution qualifications. For example, for "serious" rated enterprises, measures such as canceling the qualifications of the products involved in the case are to be disposed of and distributed; For "particularly serious" rated enterprises, measures such as canceling all their products are listed on the network and disqualified for distribution.
On April 30, the National Health Insurance Administration's latest "Evaluation Results of "Particularly Serious" and "Serious" Untrustworthiness in Price Procurement Credit Evaluation (Issue 9)" shows that as of March 31, 2024, 4 pharmaceutical companies have been rated as "particularly serious" and 21 pharmaceutical companies have been rated as "serious" untrustworthy.
The results of the assessment of "particularly serious" and "serious" untrustworthiness in the credit evaluation of price procurement (Issue 9) Image source: official website of the National Health Insurance Administration
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The results of the anti-corruption campaign have been remarkable
Pharmaceutical companies have further controlled sales expenses
It is worth noting that the anti-corruption of medicine has been effective. According to a report by the Economic Information Daily on May 7, as of press time, among the 493 pharmaceutical and biological companies in the A-share market, except for Puli Pharmaceutical, the remaining 492 have disclosed their 2023 annual reports. Flush data shows that the ratio of sales expenses to operating income of 223 pharmaceutical companies has declined.
Zhongxin Health also noticed that under the high-pressure situation of pharmaceutical anti-corruption, many pharmaceutical companies have focused on transforming and changing their marketing models to control the sales expense rate.
For example, in the second half of the pharmaceutical anti-corruption period, Shanghai Pharmaceutical's sales expenses in the second half of the year plummeted to 6.169 billion yuan, a decrease of 1.315 billion yuan from the same period in 2022, and after a significant reduction in the second half of the year, Shanghai Pharmaceutical's sales expenses in 2023 decreased by 2.64% year-on-year.
In response to the sales expense control measures at the performance briefing, Shanghai Pharma said that since the second half of 2023, the management has resolutely adjusted and optimized the marketing model, and the self-operated terminal capacity has been greatly improved and improved. It is expected that in the process of optimizing the marketing model, the sales expense ratio in 2024 will be further controlled.
However, some people in the industry pointed out that the role of pharmaceutical anti-corruption in reducing the sales expense rate may be temporary, and it is still necessary to strengthen R&D capabilities and improve internal strength to truly promote pharmaceutical companies to reduce fees.