Close on the heels of detention of a British Citizen, an American citizen too has been reportedly detained, for the first time, by the Chinese Government in connection with unfolding mega corruption scandal in the country’s pharma industry involving even ‘third party’.
A slugfest over this corruption scandal too has already begun. Media reports highlight, vested interests, as usual, retaliate by saying that China’s attention to the alleged corruption by MNCs is to benefit the local Chinese companies.
As per reports, big global pharma innovator companies like, GlaxoSmithKline, AstraZeneca and UCB are currently being questioned by the Chinese authorities related to this scam.
Critical role of ‘Third Party’ in pharma bribery and corruption:
Although in the above Chinese scam, a third party, in form of a travel agency, has been accused to have played a critical role in the GSK case, it will be hard to believe that this is a solitary example.
Internal ‘Compliance Systems’ of global pharma companies, in most cases, are believed to be robust enough and will generally be found squeaky clean by any audit. Unfortunately, as it appears from various international reports, corruption still enters through cracks between seemingly robust ‘compliance firewalls’ for business gain.
Invariably in response, expensive and high decibel Public Relations (PR) machineries are put to overdrive. These extremely capable PR agents, with their all guns blazing, keep trying to establish that such incidents, though quite frequent and are taking place across the world unabatedly, are nothing but ‘small aberrations’ in pursuit of pharma ‘innovation’ for newer drugs just to benefit the patients.
As one understands from the GSK case, the ‘third party’ travel agent reportedly attempted to keep all transactions at arm’s length to avoid detection of any unholy nexus by the Chinese regulators.
However, in the real world, it could possibly be any crafty and well-identified ‘third party’, intimately associated with the pharmaceutical business process. These ‘third parties’ are crafty enough to exploit the loopholes in the seemingly robust compliance systems of the concerned companies to help facilitating their financial performance.
An interesting commonality in all such often repeated scams is the lack of top management accountability of the companies involved. This would probably surprise even the recent public sector scam tainted concerned ministers and top bureaucrats of India.
Much to everybody’s dismay, such incidents reportedly continue to take place in various parts of the world and in all probability in India too.
Other countries initiated probes:
Unlike the high-octane development in China, in many developed countries probes against such corruption have already been initiated at a different scale and level. For example, in Canada a conservative MP reportedly testified on October 17, 2012 to the ‘Standing Senate Committee on Social Affairs, Science and Technology’ as an expert witness regarding post-approval drug monitoring and the corrupt practices of pharmaceutical companies.
Global Corruption Barometer 2013:
When a person talks about corruption, it usually gets restricted to corrupt practices in the Public Sector. Any such issue involving Business, Healthcare, Education and even Judiciary, Media and NGOs are considered at best as misdemeanor, if not minor aberrations.
In this context it is worth mentioning that ‘Transparency International’ has released Global Corruption Barometer 2013 recently. This ‘2013 Barometer’ is the world’s largest public opinion survey on corruption. It surveyed 114,000 people in 107 countries.
The reported global findings of this survey, which indicate a general lack of confidence in the institutions tasked to fight corruption, is as follows:
- More than one in two people thinks corruption in their country has worsened in the last two years.
- 54 per cent of people surveyed believe their governments’ efforts to fight corruption are ineffective.
- 27 percent of respondents have paid a bribe when accessing public services and institutions in the last 12 months, revealing no improvement from previous surveys.
- In 51 countries around the world, political parties are seen as the most corrupt institutions.
- In 36 countries, people view the police most corrupt, in 20 countries they view the judiciary as most corrupt.
- 54 percent of respondents think that the government in their country is run by special interests.
Situation alarming in India:
However, in India, the situation is much worse. Besides political parties, police and legislature, institutions like, Health Systems, Business, Judiciary, NGOs and even Media smack of high level of corruption, as follows:
| No: | Institutions | Bribe Quotient % |
| 1. | Political Parties | 86 |
| 2. | Police | 75 |
| 3. | Legislature | 65 |
| 4. | Education | 61 |
| 5. | Health Systems | 56 |
| 6. | Business | 50 |
| 7. | Judiciary | 45 |
| 8. | Religious Bodies | 44 |
| 9. | Media | 41 |
| 10. | NGO | 30 |
| 11. | Military | 20 |
Moreover, as per the report, approximately one out of four people paid a bribe globally in 2012, while in India, the bribe-paying rate was twice, with a little over one out of two people paying a bribe. Based on this indicator alone India occupies 94th rank out of 107 countries.
Coming back to healthcare in India, manifestations of high level corruptions in this critical area taken together with the same, as reported for its close connects like, as follows, are indeed alarming:
- Business houses (include pharma companies)
- Education (produces doctors, nurses etc.)
- Judiciary (also resolves various pharma disputes)
- Media (help creating unbiased public opinion)
- NGOs (takes care of Patients’ interest)
The prevailing situation is highly disturbing, as any meaningful reform measures in the healthcare space of India could be effectively blunted, if not negated, by influencing related corrupt institutions.
It is important to note that bribery in the Indian healthcare sector was as rampant as Education and Judiciary in 2012, as follows:
| No. | Sector | Bribe Paid in 2012 % |
| 1. | Police | 62 |
| 2. | Registry & Permits | 61 |
| 3. | Land | 50 |
| 4. | Utilities | 48 |
| 5. | Education | 48 |
| 6. | Tax Revenue | 41 |
| 7. | Judiciary | 36 |
| 8. | Health | 34 |
Source: Global Corruption Barometer 2013
Where there’s smoke, there’s fire:
All these numbers vindicate the well-known dictum ‘where there’s smoke, there’s fire’ for the healthcare sector, in general, and the pharmaceutical sector, in particular, of India.
Bribery and corruption appear to have emerged as the key compliance related issues in the pharma sector. A report indicates that this is mainly due to manipulable environment in the pharma industry, just like in many other sectors as mentioned above.
Such manipulations could range from influencing drug procurement prices in return for kickbacks, giving expensive freebies to the medical practitioners in return of specific drug prescriptions, and even making regional regulatory bodies to provide favorable reports overlooking blatant malpractices.
High level of tolerance:
KPMG Fraud Survey Report 2012 also highlights, though bribery and corruption continues to be an issue, pharma industry shows reluctance to discuss it openly. Moreover, close to 70 per cent of respondents surveyed said, they faced no significant threats from such issues.
The report also indicated, around 72 per cent of respondents expressed that their respective companies have in place a robust mechanism to address bribery and corruption. However, only few respondents expressed inclination to explain such in-house mechanisms. This vindicates the point of high levels of institutional tolerance to bribery and corruption in the pharmaceutical sector of India, just like in many other countries.
“Collusive nexus”:
Even a Parliamentary Standing Committee in its findings reportedly indicted India’s top drug regulatory agency for violating laws and collusion with pharmaceutical companies to approve medicines without clinical trials with the following remark:
“There is sufficient evidence on record to conclude that there is collusive nexus between drug manufacturers, some functionaries of CDSCO and some medical experts.”
A Research Scientist fumes:
Following is a reported comment of a research scientist on corruption and bribery in the pharmaceutical industry of India:
“It would not make me happy, to put it mildly, to think of a drug that I’d had a part in discovered being flogged via sleazy vacation offers and sets of cookware dumped on a doctor’s office floor.”
Where pharma and political slugfests unite:
This short video clip captures one of too many pharma slugfests given a very high level and fiery political dimension in the global pharma land.
Conclusion:
As we have seen in the ‘Global Corruption Barometer 2013’, the respondents regarded almost all key institutions and industrial sectors in India as being corrupt or extremely corrupt.
As per the above report, corruption seems to have engulfed the private sector too, and alarmingly has not spared even the ‘healthcare system’ at large , as it quite prominently shows up in the ‘Corruption Barometer 2013’.
As deliberated above, some ‘third parties’ of any type, working within the pharmaceutical value chain, could well be the fountain heads of many types of corruptions, as reported in China. They should be put under careful vigil of the regulators, placed under magnifying glasses of scrutiny and the rogues must quickly be brought to justice wherever and whenever there are violations. A report stating, Chinese administration has decided to punish 39 hospital employees for taking illegal kickbacks from pharmaceutical companies as a part of country’s widening investigation against pharma corruption, would justify this point.
That said, the task in hand is much tougher. On the one hand an Indian Parliamentary Panel observes that both regulators and the pharma companies are hand in glove to fuel corruption, instead of dousing the fire.
On the other hand, the global pharma industry has been accusing the Indian government of ‘protectionism’, ‘lack of transparency/predictability in its policy measures’ and ‘draconian IP laws’.
In the midst of all these cacophony, haven’t the stakeholders and the public at large, with exposure to contextual information, started pondering:
Gosh! in the slugfest on the pharma land, isn’t ‘The Pot Calling the Kettle Black?’
By: Tapan J. Ray
Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.