By Megha Rajagopalan
BEIJING, July 17 (Reuters) - China announced a nationwidecrackdown on the sale of illegal medicine on Wednesday and saidit would tighten industry regulation, piling pressure on asector already reeling from a bribery scandal at Britishdrugmaker GlaxoSmithKline.
The State Food and Drug Administration said the six-monthcampaign would also target illegal online drug sales and thesale of fake traditional Chinese medicine. It gave no details onpossible changes to regulation.
"We must resolutely punish illegal acts, expose illegalenterprises, recall problematic products," Wu Zhen, the agency'sdeputy commissioner, said in a statement.
The crackdown comes two days after Chinese police accusedGlaxoSmithKline of bribing officials and doctors to boost salesand raise the price of its medicines in China.
Police said GSK transferred up to 3 billion yuan ($489million) to 700 travel agencies and consultancies over six yearsto facilitate the bribes. In response, GSK said it was deeplyconcerned by the developments, which it called "shameful".
The food and drug agency did not specifically mention GSK,but a spokesman for China's Commerce Ministry said authoritieswould not hold back punishing companies engaged in bribery.
"Whether it's a domestic or foreign-invested enterprise,once it has violated Chinese law, it will be sanctioned," ShenDanyang told a news conference.
Widespread counterfeit drugs and false advertising have beena thorn in the side of Chinese regulators for years, and thedrug agency has conducted campaigns in the past to crack down.
The issue infuriates Chinese consumers, who also expressanger at what they see as the high price of legitimate medicine.
A commentary in the People's Daily newspaper said China must"lift a sharp sword to pierce the improper, even illegal, costsbehind rising drug prices" for which multinationals, such asGSK, were responsible.
China's planning agency, the National Development and ReformCommission (NDRC), is examining prices charged by 60 local andinternational drugmakers including units of GSK, Merck & Co Inc and Astellas Pharma Inc.
The pharmaceutical sector was a "disaster zone", said WillyLam, adjunct professor of history at the Chinese University ofHong Kong.
"This seems to be the largest and the best orchestratedeffort to target multinationals ... they seem to be blamingforeigners for problems they cannot solve themselves," said Lam,who closely follows corruption issues in China.
Underscoring the heat on foreign companies, a separatecommentary in the People's Daily called for a crackdown oncommercial bribery by multinational firms in general.
It accused some of using their market dominance to exploitgaps in regulatory systems in developing countries.
"A crackdown on commercial bribery by multinationals isdeeply significant to safeguarding the order of the marketeconomy and protecting an environment of fair competition," saidthe commentary in the mouthpiece of the ruling Communist Party.
Project bidding and tax systems for multinationals were alsoproblematic, the commentary said, without giving details.
FOCUS ON FOREIGN FIRMS
Some experts have suggested China may be expanding ananti-corruption drive beyond government ranks and domesticcompanies including state-run entities, focusing now on foreignfirms.
China has targeted foreign firms on multiple fronts in thepast few months, although the probe into GSK is the onlyhigh-profile, publicly known investigation focused on bribery.
European food companies Nestle and Danone said early this month they would cut infant milkformula prices in China after Beijing launched an investigationinto the industry.
Chinese media has been giving the GSK story plenty ofattention.
On Tuesday night, state broadcaster CCTV night aired aninterview with one of four detained Chinese executives from GSK.
Liang Hong, vice president and operations manager of GSK(China) Investment Co Ltd, offered details on how he funnelledmoney through travel agencies by arranging conferences, some ofwhich were never held.
"To have contact with some government departments you needmoney that you cannot normally expense to the company," Liangsaid during the broadcast.
Liang said he paid bribes to officials from the NDRC as wellas the Ministry of Labour and Social Security, which are amongthose required to get medicines approved or prices set.
It is rare for state TV to carry such interviews, althoughstate news agency Xinhua had earlier been given access to Liang.
Glaxosmithkline (GSK)