Monday, 9 December 2013

Bad news for medical device companies in China

by Damjan Denoble
“Taking kickbacks has become a de facto rule in China’s grassroots health centres.”
On Tuesday, Xinhua attributed the above quote to Wang Rusheng, deputy director of a prefecture-level city in the Southern province of Guangxi, within an article devoted to highlighting a tide of corruption allegations involving medical device sales and rural health officials.
Medical device companies, watch out. If you are affiliated with a medical device company in any way this should cause for concern, given both that Xinhua, the official news agency of the PRC, is doing the reporting, and the GSK and related scandals have cast a light on foreign healthcare companies.
It is true that Xinhua reports often serve as nothing more than scoldings to the parties involved, but at other times the focus and breadth of a particular report can indicate that something more is afoot.
The Xinhua report in this case runs like a rap sheet from an investigator several years into an investigation. No less than thirty-eight instances of corruption involving rural health officers/centers and medical devices are named in the report:
…the presidents of six rural health centers were prosecuted by the local procuratorate for taking kickbacks in the coastal city of Fangchenggang in south China’s Guangxi Zhuang Autonomous Region, making it the biggest commercial bribery case in the city’s medical system.
In 2012, six health center deans in Guangxi’s Luocheng County, a poverty-stricken county under the jurisdiction of Hechi City, were busted for accepting commissions while buying expensive medical equipment between 2008 and 2011.
Earlier this year, officers with the municipal procuratorate of Liaocheng City in east China’s Shandong Province found that 16 rural health centers were involved in such cases, accounting for 88.9 percent of hospital and health center bribery cases in the city.
From 2009 to 2011, six heads of rural health centers in Dayao County in southwest China’s Yunnan Province were targeted in a crackdown for taking kickbacks when buying medical equipment.
In a 2011 anti-corruption campaign, four health center heads in Xinshao County in the central province of Hunan were punished for taking commissions when purchasing medical equipment.
When medical device giant Siemens A.G. got in trouble for corruption in the medical device context it was mainly through its efforts to game the public bidding system (we’ve described that here). But, in rural areas medical device sales people are bypassing the bidding process all together. Again, from the Xinhua article:
According to Bai Zhipeng, the general public is more concerned about doctors receiving kickbacks for medicine, and largely ignores the fact that hospitals and rural health centers increasingly take commissions from sales agents selling medical equipment.
Bai laid the blame on a lack of open bidding when rural health centers purchase medical equipment.
Although the government requires open bidding before purchases, the grassroots medical institutions, which manage funds on their own, tend to buy equipment without notifying county-level health bureaus, which makes it difficult for the government to supervise, Bai said.
Even when centers hold open bidding, bidding documents can be changed to meet the specific requirements of the medical equipment companies that have secretly offered bribes to those in charge of centers.
Luo Guo’an, an expert from the Guangxi Academy of Social Sciences, said that while China’s rural medical institutions are welcoming the boom in medical equipment purchases, supervision is still poor compared with big city hospitals.
If you’re paying attention, county-level health bureaus do not have the man-power to check up on all grassroots health institutions purchasing equipment. Moreover, just like in the public bidding processes, medical company salespeople and rural health buyers collude to alter paperwork so that the transaction as reflected on paper appears legitimate.
At the very end of the article there is one sentence that is singled out from the rest of the text:
Serious corruption in the poor areas of China has drawn the public’s attention, and now governments on various levels are considering measures to battle the crimes.
This is pretty much a statement of policy intent. They key thing here is that the corruption has drawn public attention and forced itself into the political calculus of local officials.
Source: Health Intel Asia

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