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China drugmaker Sino Biopharmaceutical investigating TV corruption report

By Adam Jourdan

SHANGHAI (Reuters) - Chinese drug company Sino Biopharmaceutical Ltd has set up a team to investigate allegations broadcast on state television that its majority-owned subsidiary had paid for illegal overseas trips for doctors, it said on Thursday.

Regional sales teams at Chia Tai Tianqing Pharmaceutical Group Co Ltd, 60 percent owned by Sino Biopharmaceutical, had paid for doctors to travel to Thailand and Taiwan, which could be considered illegal bribes, China Central Television (CCTV) reported late on Wednesday.

Hong Kong-listed Sino Biopharmaceutical is the second Chinese firm to come under the spotlight this week, underlining that domestic companies are not immune to a recently launched drive against corruption in the sector.

Privately held Gan & Lee Pharmaceuticals said separately on Wednesday it was investigating allegations it spent about 800 million yuan ($130.75 million) to bribe doctors to promote the firm's drugs over five years.

Goldman Sachs Group Inc holds a 4.07 percent stake in Gan & Lee through a Beijing-based investment fund, a spokeswoman for the U.S. investment bank said on Thursday.

Cao Xiwen, the chairman's secretary at Sino Biopharmaceutical, told Reuters by telephone the company had sent a team to investigate the allegations, but there was no conclusion yet. He said the problem was confined to the Jiangsu-based subsidiary.

"We are sending a team down the look into the situation ... When they clarify the problem locally, we will have a better idea at head office in Beijing," he said.

CCTV cited a company insider and showed undercover footage indicating sales staff had paid about 6,500 yuan ($1,100) per doctor on certain overseas trips.

Sino Biopharmaceutical had a turnover of HK$4,751.81 million ($612.75 million) in the six months to June this year, up about 35 percent against the same period in 2012, according to a filing with the Hong Kong stock exchange.

Sino Biopharmaceutical shares plunged nearly 25 percent to a half-year low before trading was suspended around midday with the shares down more than 16 percent. Deutsche Bank said in a note the firm's management had lowered growth estimates for the second half of the year because of the CCTV report.

LOW SALARIES, WHISTLEBLOWERS

A series of recent media exposes has coincided with several investigations into the pharmaceutical sector, spanning alleged corruption to how drugs are priced.

The most high-profile investigation into corruption in the pharmaceutical sector in China involves British drugmaker GlaxoSmithKline.

Police have detained four Chinese executives from GSK over allegations it funneled up to 3 billion yuan to travel agencies to facilitate bribes to doctors to boost the sale of its medicines. GSK has said some of its senior Chinese executives appear to have broken the law.

Corruption in China's pharmaceutical industry is widespread, fueled in part by low base salaries for doctors at the country's 13,500 public hospitals.

A number of whistleblowers have made a beeline for China's 21st Century Business Herald newspaper over the last months.

Last month, U.S. drugmaker Eli Lilly and Co said it was "deeply concerned" after the newspaper quoted an unidentified whistleblower saying it spent more than 30 million yuan to bribe doctors in China.

The paper also quoted whistleblowers in August as saying Swiss drugmaker Novartis AG and French company Sanofi SA had paid bribes to doctors to boost drug sales.

($1 = 7.7550 Hong Kong dollars) ($1 = 6.1185 Chinese yuan)

(Additional reporting by Shanghai Newsroom and Clement Tan in Hong Kong; Editing by Robert Birsel)

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