Corruption raises drug costs
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Wu Jianwen, president of Shanghai Pharmaceutical Group, was detained for taking bribes when choosing subcontractors, reported 21 Century Business Herald Wednesday.
Wu Jianwen's secretary claimed ignorance of the case but did not deny Wu's detention.
"The amount of the bribes is not clear. But only a couple of millions cannot put high-ranking people like Wu under investigation," said the report, citing a source close to this matter, which implied that the amount of money involved might be huge.
"To accept the so-called 'grey money' is common in the pharmaceutical industry. Nearly every layer of the industry, from producers, distributors, to medical representatives and doctors, can get kickbacks. This is one of the unwritten rules of the industry," said Guo Fanli, a medical analyst with CIC Industry Research Center.
About two months ago, the Deputy Commissioner of the State Food and Drug Administration (SFDA), Zhang Jingli, was detained for accepting bribes from Johnson & Johnson. In 2007, another high-ranking official Zheng Xiaoyu, the former director of SFDA, was sentenced to death for accepting bribes amounting to 6.49 million yuan ($958,428.71).
"Wu's case is only the tip of the iceberg," Guo said. "Each layer of the industry is reaping huge profits illegally. The consumers end up paying higher prices because of this."
Outsourcing sales of the products to subcontractors is a quite common practice in the industry. Recently, the National Development and Reform Commission set the price of antibiotics very low forcing subcontractors to acquire lower price from producers. Wu Jianwen ran the antibiotics sector of Shanghai Pharma.
Last October, the company went public, but the antibiotics sector of the company was not part of the listed assets. "Otherwise the company would be seriously affected by this scandal," the source said.
