| SHANGHAI, Sept 25
SHANGHAI, Sept 25 Danone SA's advanced
medical nutrition unit Nutricia has started an internal
investigation after a Chinese newspaper published a report
alleging it had bribed more than 100 doctors in Beijing to boost
sales, the company said on Wednesday.
It was the third time in two weeks that a division of French
food group Danone has had to respond to accusations of bribery
by Chinese media, after its infant milk formula group Dumex was
twice the subject of bribery allegations reported by China's
China is a magnet for foreign milk powder makers, with a
$12.4 billion market that is expected to double by 2017. But
foreign firms are under scrutiny after recent media reports
alleging corrupt sales practices in the industry. Authorities
last month also fined a group of mostly foreign milk powder
producers $110 million for price fixing.
Nutricia, which makes Karicare milk formula, bribed doctors
at 14 hospitals in the Chinese capital with kickbacks, gifts,
funded-travel and complementary show tickets between 2010 and
2013, the 21st Century Business Herald said on Wednesday, citing
an unnamed whistleblower who claimed to be a student doctor.
The whistleblower had 52 documents detailing payments from
Nutricia, the largest portion of which were to Beijing Aerospace
General Hospital and Xuanwu Hospital Capital Medical University,
according to the paper.
Nutricia had paid a sum of 300,000 yuan ($49,000) to a dozen
doctors at the two hospitals over a three-year period, it said.
"We only saw the report this morning, so we've only just
started an internal investigation into the matter," Zhao
Qinghua, a spokeswoman for Nutricia in China, told Reuters.
"At the moment we still don't know the details... We need to
wait to see the outcome of the investigation before we can make
our next plans."
The two hospitals at the centre of the allegations did not
immediately respond to telephone queries about the report.
Corruption in China's pharmaceutical industry remains
widespread, fuelled in part by low base salaries for doctors at
the country's 13,500 public hospitals.
The 21st Century Business Herald said the documents also
showed that sales representatives had made bribes through more
unusual means, such as cleaning doctors' fish tanks and
organising strawberry picking trips for staff.
In the milk powder sector, hospitals are an important sales
and marketing channel because a recommendation from medical
staff can help persuade new parents to choose a particular
brand, which they often stick with, industry insiders said.
Milk powder firms typically spend close to 5 percent of
their revenue "opening" medical sales channels, a separate
recent report in the 21st Century Business Herald said, citing a
China-based former employee at a foreign milk powder brand.
International guidelines used in China say doctors should
promote breastfeeding unless there are medical reasons not to.
Recent salvos against international milk powder companies -
allegations of widespread corruption, pricing probes and strong
official reaction to a food scare at New Zealand dairy producer
Fonterra Co-operative Group Ltd - suggest global
formula makers may face a more competitive playing field,
A statement from China's health ministry last week said it
would crack down on hospital sales tactics and punish staff who
This could result in a slowdown of sales and marketing
activity in hospitals for infant formula and hit sales
performance, said Katherine Wang, chief China life sciences
advisor for law firm Ropes & Gray.
Recent investigations into bribery in the pharmaceutical
sector have hit sales operations and dented revenues for Chinese
and international drug firms.
"I think (the corruption probes) will definitely create a
sense of threat and also probably prevent regular interaction
between the healthcare services providers and sales reps of the
infant formula manufacturers," said Shanghai-based Wang.
"Because of the public oversight and the government
scrutiny, I suspect within the infant formula manufacturers
there's going to be an enhanced wave of internal compliance
control investigations and audits."
Whistleblowers have made a beeline for the 21st Century
Business Herald, with the paper publishing allegations against
drugmakers Eli Lilly and Co, Novartis AG and
Sanofi SA. The newspaper has declined an interview
request from Reuters on why whistleblowers keep speaking to it.
In Wednesday's report, it said that under the direction of
the Ministry of Supervision, Beijing and other cities had set up
teams to look into the recent spate of anonymous whistleblowing,
and would check the authenticity of the latest allegations
($1 = 6.1210 yuan)
(Reporting by Adam Jourdan; additional reporting by Shanghai
Newsroom; Editing by Alex Richardson)