18 April 2019

Anti-graft drive gives pharmas the shivers

The National Health and Family Planning Commission is on the march. It has sent out eight teams of inspectors this month to audit public health authorities in 16 provinces, autonomous regions and municipalities. It’s another warning to the pharmaceutical industry after several big multinational pharma firms were put on notice about bribery this year.

The latest bout of official activity to clean up the medical sector should not be underestimated. Apart from sending inspectors, the commission has also set up a high-level working group to tackle commercial bribery across the sector, financial news portal AAStocks reported, suggesting action to clamp down on rampant corruption will persist and not be confined to multinationals.

The situation triggered flashbacks to a similar major anti-graft operation in China in 2006, the website was quoted as saying. Back then, the drive sent a shudder through the sector and led to a marked slowdown in both sales and profit growth sector-wide. 

Xiangxue Pharmaceutical Co. Ltd. (300147.CN) and Guangzhou Baiyunshan Pharmaceutical Holdings Co. Ltd. (600332.CN), two Chinese patent medicine makers, told AAStocks that the anti-graft drive had chilled sales.

Guangzhou Baiyunshan shares have risen more than 85 percent this year and Xiangxue is up 160 percent. Certainly, the pharmas stand to benefit from the government initiatives to boost public health-care spending over the long run. But investors should note that short-term risks are on the rise.

– Contact the writer at [email protected]


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