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Pin to quick picksGlaxosmithkline Share News (GSK)

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UPDATE 2-China anti-graft watchdog visits Roche amid pharma crackdown

Thu, 22nd May 2014 10:36

* Swiss drugmaker says specific details unclear

* China cracking down on wider pharma sector (Adds comment from SAIC, updates shares)

By Adam Jourdan and Caroline Copley

SHANGHAI/ZURICH, May 22 (Reuters) - Swiss drugmaker RocheHolding AG said it had been visited by a unit ofChina's anti-trust regulator, apart of a widening crackdown oncorruption and high prices in the country's pharmaceuticalsector.

It was not immediately clear what was behind the visit.

Roche said its offices in the eastern city of Hangzhou hadbeen visited by a unit of the State Administration for Industryand Commerce (SAIC). The SAIC usually takes the lead in cases ofbribery and corruption.

"We understand that a local government unit in Hangzhouvisited Roche's offices on May 21, but the specific details arenot yet clear. We will cooperate fully with the work of therelevant government department," Roche said in a statementemailed to Reuters on Thursday.

A spokeswoman for the local office of the SAIC told Reutersthe visit was for a range of issues, but declined to elaborate.She said the office had yet to reach a conclusion about theissue.

Roche's shares were trading down 0.5 percent at 264.7 francsby 1019 GMT compared to a 0.4 percent weaker European healthcaresector index

Last week Chinese authorities charged executives at Britishdrugmaker GlaxoSmithKline over bribery and corruption,and legal and industry sources have said the crackdown on thepharmaceuticals sector is likely to intensify.

"More and more firms have been visited by the SAIC in thewake of the GSK case," John Huang, Shanghai-based managingpartner at law firm MWE China, told Reuters.

In 2013, Chinese authorities visited large internationaldrug manufacturers that included Novartis AG,AstraZeneca Plc, Sanofi SA, Eli Lilly & Co and Bayer AG as part of a broad investigationinto the sector.

HUGE MARKET

China has become a magnet for global drugmakers and medicaldevice markets, with its pharmaceutical market set to become theworld's second-biggest behind the United States within threeyears according to consultancy IMS Health.

It is a key growth market for Roche; sales of its drugs inthe country rose by 21 percent last year. Roche, which is theworld's largest maker of cancer drugs, does not give absolutesales numbers for China.

A corruption inquiry in China can have a serious impact.

Official Chinese media said on Friday that GSK might havesuffered "irreparable damage" in the Chinese market from theinvestigation, and that the charge was a warning to otherforeign firms in the country.

GSK's revenues in China plunged 61 percent in the thirdquarter last year and were down 20 percent in the first quarterof 2014 from a year earlier.

The British drugmaker has said it wants "to reach aresolution that will enable the company to continue to make animportant contribution to the health and welfare of China andits citizens".

Corruption is rife in China's healthcare sector, driven byhigh targets for sales staff and low salaries for doctors. Lawyers have estimated that around half of all pharmaceuticalfirms in China were being investigated in some capacity. (Reporting by Adam Jourdan in SHANGHAI and Caroline Copley inZURICH; Editing by Kazunori Takada and Edwina Gibbs)

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