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Lilly says deeply concerned by bribery allegations in China

Prozac medicine is seen at a pharmacy in Los Angeles, California, October 18, 2010. REUTERS/Lucy Nicholson
Prozac medicine is seen at a pharmacy in Los Angeles, California, October 18, 2010. REUTERS/Lucy Nicholson

SHANGHAI (Reuters) - U.S. drugmaker Eli Lilly and Co said it was "deeply concerned" about allegations published in a Chinese newspaper that it spent more than 30 million yuan ($4.90 million) to bribe doctors in China to prescribe the firm's medicines instead of rival products.

A former senior manager for the company, identified by the pseudonym Wang Wei, told the 21st Century Business Herald that bribery and illegal payments at Eli Lilly's China operations were widespread, the paper reported on Thursday.

Eli Lilly is the third foreign drugmaker to face whistleblower accusations in the newspaper this month. The reports coincide with multiple Chinese investigations into the pharmaceutical sector, spanning alleged corruption to how drugs are priced.

"In order to hit sales at rival companies and push the company's own products, bribes and special payments of all sorts were extremely common at the company. The level of the problem was just as bad as at GlaxoSmithKline," Wang was quoted as saying.

The report said the 30 million yuan in bribes were handed out over a period of around one year from 2011 to 2012.

Police have detained four Chinese executives at British drugmaker GlaxoSmithKline over allegations it funneled up to 3 billion yuan ($489.92 million) to travel agencies to facilitate bribes to doctors to boost the sale of its medicines. GSK has said some of its senior Chinese executives appear to have broken the law.

Eli Lilly said in an emailed statement to Reuters that it was looking into the matter.

"Although we have not been able to verify these allegations, we take them seriously, and we are continuing our investigation," the statement said.

The U.S. firm said it had been made aware of separate but "similar allegations" of kickbacks in 2012 by a former sales manager. Lilly said it had opened an investigation at that time involving staff interviews, e-mail monitoring and expense report audits.

Wang told the newspaper that company employees paid the bribes to promote two of the company's key insulin products in Shanghai and neighboring Anhui province.

Further kickbacks in the form of paid talks, conferences and other contributions were also made, he said.

Last week the 21st Century Business Herald quoted an unnamed whistleblower as saying Novartis AG had paid bribes to doctors to boost drug sales, prompting the Swiss company to launch an internal investigation.

Health Ministry officials are also investigating Sanofi SA over bribery allegations after the newspaper said staff paid bribes totaling about 1.7 million yuan to more than 500 doctors in late 2007 to boost sales. The French company has said it is taking the claims "very seriously".

Lilly has 3,600 employees in China, representing almost 10 percent of its global workforce. Many of them work at its research center in Shanghai and a manufacturing site in Suzhou.

The company, whose Humalog and Humulin insulins have combined global sales of almost $4 billion, also sells widely used treatments for depression, cancer, osteoporosis and schizophrenia.

Lilly earlier this month said its facilities in Shenyang were inspected toward the beginning of the year by the state Administration for Industry and Commerce (AIC). The antitrust regulator is in charge of market supervision, but also investigates low-level bribery cases.

Lilly cooperated with the AIC investigators and has not received any formal notice regarding their visit, the company said.

The drugmaker on Thursday said China's Public Security Bureau, the country's main police authority, had not contacted the company about any of the allegations or inspections.

Lilly is no stranger to bribery allegations. Last December, the Indianapolis company agreed to pay $29 million to settle U.S. civil charges that its subsidiaries made improper payments to foreign government officials to win business in Russia, Brazil, China and Poland.

The settlement with the U.S. Securities and Exchange Commission stemmed from an investigation by the SEC of Lilly's activities between 1994 to 2009.

Corruption in China's pharmaceutical industry is widespread, fueled in part by the low base salaries for doctors at the country's 13,500 public hospitals.

(Reporting by Adam Jourdan; additional reporting by Ransdell Pierson in New York; Editing by Kazunori Takada, Dean Yates and Andrew Hay)

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