Crackdown on drug giants can fight corruption

PUBLISHED : Friday, 19 July, 2013, 12:00am
UPDATED : Friday, 19 July, 2013, 3:35am

Former health minister Chen Zhu, now a vice-chairman of the National People's Congress, said earlier this year his trickiest task had been trying to change public hospitals. Just how tricky is shown by the central government's investigation of British drug giant GlaxoSmithKline over a reported 3 billion yuan (HK$3.8 billion) in kickbacks to hospitals and doctors. This exposes a systemically corrupt relationship between the pharmaceutical industry and mainland hospitals.

The corruption of big pharmaceutical firms, which can put huge profits before patient safety and raise health costs, is global. But it became chronic on the mainland after free-market reforms forced most hospitals to become profit-making enterprises in order to pay staff and other costs. This created an incentive for hospitals and doctors to accept kickbacks for prescribing drugs from foreign and domestic companies. A surgeon at a Shanghai hospital officially earning 20,000 yuan a month has admitted that half his real income came from kickbacks for prescribing drugs.

The result is overprescribing. Costs to the patient are also increased by a medicine surcharge - in plain language, a commission - of 15 per cent of the drug price as compensation for government funding shortfalls. Corruption spread up the line, with bureaucrats accepting bribes for listing drugs in the "essential drug category", from which public hospital doctors must prescribe.

Pilot public-hospital reforms that replace the surcharge with a medical-care service charge began at 300 county level hospitals last year, with the goal of abolishing it in all hospitals by 2015. The allegations against GSK could be the catalyst for a comprehensive clean-up of widespread corrupt practices in the pharmaceutical industry. The government should be seen as fair by including domestic firms in the crackdown. Foreign firms may plead that they have to conform with local business practices. But as health multinationals they should be held to the highest standards of global citizenship.