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UPDATE 3-China widens drug industry probe, visits Belgium's UCB

Fri, 19th Jul 2013 08:51

* UCB's Shanghai office visited by anti-trust body SAIC

* UCB says it one of several pharma companies inspected

* Follows accusations of large-scale bribery by GSK

* China taking tough line on several industry sectors

By Ben Deighton and Ben Hirschler

BRUSSELS/LONDON, July 19 (Reuters) - Belgian drugmaker UCB has been visited by Chinese authorities as the countrywidens investigations into bribery by drugmakers, followingallegations against Britain's GlaxoSmithKline.

A spokesman for UCB said on Thursday that officials werealso investigating other drug companies with operations in thecountry, although he did not identify them.

A number of international firms - including Novartis, Roche, Johnson & Johnson andAstraZeneca - denied any knowledge of being investigatedfollowing the UCB news.

Chinese police have accused GSK of bribing officials anddoctors to boost sales and raise the price of its medicines,marking a hardening stance against malpractice by multinationalsoperating in the country.

"They've been launching inspections with several pharmacompanies active in the country, both Chinese and foreigncompanies such as ours, and as part of the process our Shanghaioffice was visited by the agency in the last 48 hours," the UCBspokesman said.

UCB is a medium-sized pharmaceuticals company with aparticular strength in epilepsy treatment.

The officials visiting the group's office were from theState Administration for Industry and Commerce (SAIC) and wereseeking information on compliance, he said.

The SAIC is one of China's main three anti-trust regulatorsin charge of market supervision.

Its investigations often overlap with the country's topwatchdog, the National Development and Reform Commission, whichhas recently launched a pricing investigation into local andinternational drugmakers, including GSK, Merck andAstellas Pharma.

China on Monday accused GSK of transferring up to 3 billionyuan ($489 million) to 700 travel agencies and consultancies tofacilitate bribes - an allegation Britain's top drugmaker saidit was deeply concerned about and which it called "shameful".

The official Xinhua news agency said on Thursday thatauthorities in Shanghai had suspended the business of theShanghai Linjiang International Travel Agency, one of thebusinesses linked to GSK.

The tough Chinese action against GSK, including thedetention of four senior Chinese executives and a ban on a topBritish executive leaving the country, has sent a chill throughthe wider pharmaceutical sector.

There has been widespread speculation that othermultinational companies would be drawn into the corruptioninvestigations.

"This is bigger. This is not just GSK. The entire industryis on a journey here," one European drug industry executivesaid.

CORPORATES UNDER FIRE

The GSK investigation is the highest-profile corporate probein China since four executives from mining giant Rio Tinto were jailed in March 2010 for taking bribes andstealing commercial secrets. Three of those executives wereChinese while the fourth was a Chinese-born Australian.

Beijing has targeted corporations on multiple fronts in thepast few months, including over alleged price-fixing, qualitycontrols and consumer rights.

European food groups Nestle and Danone said they would cut infant milk formula prices in China afterBeijing launched an inquiry into the industry.

And on Friday the official People's Daily newspaper reportedthe Chow Tai Fook Jewellery Group, the world's biggestjewellery retailer by market value, was among a number of goldshops being probed for price fixing.

Past improper payouts in China have also landed otherWestern drugmakers in trouble - although with U.S. rather thanChinese authorities.

In the last year Pfizer and Eli Lilly haveboth settled with Washington, without admitting wrongdoing, overalleged corrupt payments in foreign markets, including China. More cases under the U.S. Foreign Corrupt Practices Act arepending.

China is increasingly important for big drugmakers, whichrely on growth in emerging markets to offset slower sales inWestern markets. IMS Health, which tracks pharmaceuticalindustry trends, expects China to overtake Japan as the world'ssecond-biggest drugs market behind the United States by 2016.

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