China audits drug companies

Home/Policies & Legislation | Posted 23/08/2019 post-comment0 Post your comment

In June and July 2019, China embarked on an audit of 77 major pharmaceutical companies, including the local arms of Sanofi, Eli Lilly & Co and Bristol-Myers Squibb Co. This action was undertaken after one of its largest listed drug manufacturers overstated its cash position by US$4.3 billion. The announcement called an index of healthcare companies traded in Shanghai and Shenzhen to fall by 1.8%.

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China’s Ministry of Finance stated that the list of drug manufacturers to be audited was randomly chosen. The three multinationals were joined by China’s biggest domestic drug firms, including Jiangsu Hengrui Medicine Co, Shandong Buchang Pharmaceuticals Co and Shanghai Fosun Pharmaceutical Group Co. It is being conducted by the finance ministry and China’s National Healthcare Security Administration.

The audit was announced just weeks after Kangmei Pharmaceutical Co, a producer of traditional Chinese medicines, said after a regulatory probe that it had used false documents and transaction records to overstate its cash holdings by 29.9 billion Yuan.

As its growing middle class demand better quality medical access, China is embarking on a major overhaul of its healthcare system. It is attempting to clean out firms that are not keeping up standards from the sector, these include those with accounting irregularities to makers of low-quality vaccines.

China’s regulators are also hoping to drive down generic drug prices so that more money can be spent on new medicines and improving access to them. The new pricing policy has caused problems with Chinese pharmaceutical shares, as the sector largely relies on generic drug sales.

It is hoped that the audit will reveal more about the real cost of drugs and pave the way for further reductions in drug prices.

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