Gsks take a long breath: Sinopharm has also been checked

Source: Forbes 2014-1-21 since the Chinese government exposed GSK's bribery in China in the summer of 2013, foreign pharmaceutical and equipment companies have privately expressed their dissatisfaction with the unfair treatment they received in the face of their local competitors Many doubt that the anti-corruption red light on GlaxoSmithKline will also target local enterprises Most Chinese companies will readily admit that they have committed far more serious violations than GlaxoSmithKline's bribery For overseas multinational companies operating in China, although such dissatisfaction has existed for a long time, it is particularly prominent in the Chinese medical industry In this industry, bribery has become a common practice The bribers are not only enterprises, but also ordinary people trying to approach and influence Chinese doctors and hospital managers Last week, two executives of Sinopharm were detained by Chinese authorities on suspicion of corruption This may to some extent satisfy foreign pharmaceutical and equipment companies There are two reasons for this First, although multinationals know they will face higher standards than their local competitors, they still want to see the Chinese government pay some attention to the illegal activities of local enterprises Although this sense of fairness may have nothing to do with public sentiment about medical bribery practices across China, it does slightly increase the trust of foreign enterprises in the Chinese government Multinationals want to see local companies face the same or just roughly similar standards The corruption investigation of Sinopharm group shows that the Chinese government is playing a real role in cracking down on the corruption of domestic and foreign enterprises at the same time This is good news for overseas Chinese enterprises In addition to making multinational companies feel treated fairly, the corruption investigation of Sinopharm group also makes it more likely that Chinese local enterprises will reduce their resistance to anti-corruption and increase their resistance to the problem of insufficient income It is this problem that makes corrupt culture inevitable One of the major dangers facing China's medical system is that the income problem of public hospitals has never been solved If doctors and hospital managers continue to struggle to meet revenue targets, and key players, such as doctors, remain underpaid, then the corruption of last summer will clearly persist Foreign companies have little influence on the policies implemented by China's Ministry of Finance and Ministry of health, while local enterprises have a greater say Although the corruption investigation incident of Sinopharm group is regarded as another signal sent by the government to the medical industry, it also creates opportunities for local enterprises (to be exact, those local enterprises that the Chinese government hopes and needs to see to realize profits and development at home and abroad), so that they can fight back and demand the implementation of policy reform and change the environment of them, hospitals and doctors Environment If regulators really want a clean and efficient healthcare economy with minimal bribery, then China must not only fight against corruption, but also appropriately increase government funding The combination of these two measures is what domestic and foreign enterprises want to see, but domestic enterprises may prefer to see relevant departments of the Chinese government do so The second reason why Sinopharm's corruption investigation may be popular with foreign companies is that it is not about manufacturers, but about distributors This is important for a number of reasons, especially targeting domestic distributors, which allows the Chinese government to focus on the extremely inefficient pharmaceutical channel market At Kearney, a management consultancy, wrote about China's pharmaceutical distribution market, saying "a wide range of channels, decision makers and regulations have greatly increased the complexity of this market." These complexities make it difficult to integrate the Chinese pharmaceutical distribution market, and the low integration of the market means that there are huge price differences, and it is difficult to achieve the improvement of logistics efficiency and the reduction of ordinary costs According to the analysis of corney management consulting, Sinopharm group, China's largest pharmaceutical distributor, together with the other two domestic distributors, only accounts for 20% of China's pharmaceutical market In developed countries, the market share of the top three pharmaceutical distributors often exceeds 90% The decentralization of China's pharmaceutical distribution market has resulted in very low efficiency, offsetting many of the price and planning benefits of the expansion of China's essential drug catalog By forcing China's largest pharmaceutical distributors to stay away from long-standing bribery in the market, it is possible to focus pharmaceutical distribution channels more on other factors that drive business growth Specifically, it is to reduce the overall transportation cost of important drugs, force distributors to manage the drugs they sell to hospitals more carefully, and implement more strict compliance requirements Through the pressure on small distributors, it will integrate the market in a way more conducive to large, famous and professional distributors Many of these potential benefits depend on China to solve the fundamental problems of insufficient hospital funds and low doctor income Through the corruption investigation of Sinopharm group, China has sent a positive signal to foreign pharmaceutical companies and raised expectations of strengthening the requirements of review and compliance, which may lead to the integration of decentralized and very inefficient Chinese pharmaceutical distribution market