Sunday, March 13, 2022

EN -- LARRY ROMANOFF -- A Litany of Pharma Crimes – Part 4 – US Pharma in China


A Litany of Pharma Crimes – Part 4 – US Pharma in China

By Larry Romanoff, March 10, 2022


Hassell | Zhangjiang Pharmaceutical Campus


In June of 2013, Sohu China published an article by Yun Wuxin, claiming that "after more than 100 years of work, the FDA has formed a comprehensive regulatory system, which many other countries have now emulated. The core concept of the system is to protect those that abide by the rules and punish those that break the law, using penalization to prevent further incidents from occurring."


I seldom see comments as disturbingly uninformed as these, claims so incorrect and with such tragic potential for human loss they should be treated as a criminal offense and punished by flogging and imprisonment. It is both astonishing and absolutely unforgivable that so many Chinese in authoritative positions will blindly accept the most stupidly false claims about American superiority in one field or another, apparently without doing even the most superficial investigation into the accuracy of these claims. This blind 'white first' attitude is in many instances so reckless, and carries such dangers for China, that any positive recommendations of American products should carry an automatic threat of imprisonment if proven false. Furthermore, someone needs to check on the original authorship of some of these articles and label them as the ghost-written foreign propaganda that they are - which practice in publication should also be a criminal offense.


There are few penalties that will deter the overwhelming greed and instinctive criminality of the pharma industry, in China or anywhere else. We need penalties in the tens of billions of dollars, not in billions or hundreds of millions. When a firm makes $20 billion in illegal profit and pays only a $1 billion fine, where is the incentive to desist? The legal authorities need to punish pharma companies for illegal drug marketing by fining them the full retail value of the total sales of that medication in the country. Next, we need criminal charges and prison sentences, not against the company, but against its executives and officers. When these individuals face ten or more years in prison or a potential execution for an illegal act, they will think twice. Another avenue for firms committing fraud is to ban that company forever from drug sales to any part of the national health system, thereby eliminating the bulk of their revenue in the country forever.


A final measure, one which the Americans are now seriously considering, is a 'blacklist', to rescind the national patents for each and every medication involved in any kind of fraudulent activity, opening the manufacture and sale to generic drug companies. This could also extend to a lifetime prohibition of employment in the pharmaceutical industry for any individuals involved in illegal activity. The large pharma companies extract such astonishing profits from many of these medications only due to the patent system, so the recision of the patent would be an appropriate threat, one that should actually be carried out in many instances.


In an article in the Financial Times, Andrew Ward and Patti Waldmeir boasted with a headline that "Big pharma's rise in China not held back by scandals". (1) And that's the problem. The profits are so enormous that the scandals are irrelevant. It is my personal view that the pharmaceutical industry is so deeply contaminated with what is in fact a hardened criminal philosophy that only the repeated combination of all the sanctions listed above, will have any effect. It is worth noting that every country wants to put a stop to extensive illegalities in this industry, and one bold move will certainly inspire others. I believe China is doing it right by targeting the individuals for prison sentences as well as the corporations for large fines, but a commuted sentence is of no value. These people need to sit in a prison cell for ten years in order to absorb the lesson. And China should not be concerned with imprisoning Americans, for two reasons at least. One is that the Americans would like to imprison most of these people themselves, and the second is that the Americans have no hesitation whatever in tossing a Chinese national into prison for much lesser offenses.


It is interesting to read the arrogant whining in the US media about the possibility of American executives of US pharma companies in China actually going to prison for their crimes. One Washington lawyer named Carl Valenstein wrote that the possible detention of Americans "could affect the willingness of non-Chinese companies to send their personnel into China", and of course that's the idea. Keep your criminals at home where they belong, since China doesn't need them. Valenstein also wrote that "Pharmaceutical companies doing business in China are watching these developments closely", and again that's the whole idea. This is your window on what will happen to you if you import your illegal American practices into China. Given the almost incomprehensible criminality infecting the entire worldwide pharma industry, there is little point in worrying about the good will of either these companies or their governments.


On this note, a (probably fictitious) salesperson purportedly with Eli Lilly, who naturally asked to remain anonymous, complained that it was "a difficult time for foreign pharmaceutical companies and their staff, especially their sales forces". He is quoted as saying, "It's hard to see for now how the country's sudden brake on commercial corruption in the medical sector will affect each individual's sales performance, but we feel very dismayed. I don't understand why the foreign firms are singled out in the crackdown. We are definitely not the fundamental cause generating the disorder in the medical sector, (nor) a main contributor in the strained relations between doctors and patients." Well, we can sympathise with the poor man's dismay, and with his loss of sales in the absence of bribery, but he needs to be informed that his American companies are indeed the main contributor and the fundamental cause of the problems. And in the end, my concern is on the side of the millions who must pay the price of this greed and corruption, not wasting much sleep over the earnings of a drug salesman.


In 2013, China intensified an already ongoing investigation into alleged bribery in the pharmaceutical and medical services sectors, aimed at stamping out not only bribery but all fraud and anti-competitive practices among both foreign and domestic companies. Much of the focus was on illegal pricing and violations of the bidding process. SAIC, the State Administration for Industry and Commerce, stated that "Commercial bribery not only leads to artificially high prices, it undermines market order in terms of fair competition and corrupts social morals and professionalism", is destructive to the industry, and harms patients. The SAIC also said it wanted to prevent industry associations from organising fraudulent and monopolistic behavior, since in 75% of such past cases these associations had been "the driving force" behind the corruption.


In case you haven't made the link, these "industry associations" are what we call NGOs, part of Hillary Clinton's "civil society" promotion, groups supposedly vital to a nation's development but in fact simply subversive American political organisations, their activities including the masterminding of these industry-wide frauds. They include the US Chamber of Commerce in China (AmCham), variously-named and US-funded Pharmaceutical associations, and much more.


In spite of the denigrating accusations directed at China for corruption in the medical system, it is the US, not China, with the most criminally corrupt medical and pharmaceutical environment. But in contradistinction, it is not the US but China that is actually taking real steps to eliminate the rot. When pharma executives in America commit egregious crimes even involving death on a massive scale, the only consequence is that the company's shareholders suffer a small loss. In China, they go to prison or worse.


When the FDA approves the continued distribution of fake or dangerous medications, or when it certifies a new killer drug, there are no consequences because the FDA, by virtue of its status, is immune to legal or criminal sanction. But when China's chief drug regulator, Zheng Xiaoyu, approved similar medications, he was tried and executed for what were considered crimes against the entire nation. It is China, not the US, that is cleaning up the world's pharma industry. And it needs to be noted somewhere that all of the major criminal pharmaceutical scandals in China have been committed by foreign companies, mostly American.


One American reader made some interesting points in commenting on a media report on corruption in big pharma:


"Upon reading the comments from other readers, it appears to me that the point of the article was lost on many. In (bad) China, people did bad things that HURT other people. Lots of people. The gov’t responded with badly needed heavy-handed proceedings and pronouncements. In (good) America, people did bad things that KILLED other people. Lots of people. The gov’t response was tepid and minimal, much of it downplayed and swept under the rug, the outrage squelched. No one paid a price for the deaths of those people, and the corporation responsible paid next to nothing as a percentage of sales and the stock (during a bad economy) has rebounded. In (bad) China, people were held responsible for their actions. In (good) America, people got off scott-free after playing the system, hiding the truth. The top man in charge retired with mega bucks and no consequences." Precisely correct.


When an official in Shanghai accumulated 50 million RMB from bribes and other corrupt acts, a Shanghai court levied a suspended death sentence, and other high-level officials have been fired for ethics violations, these not only in regulatory bodies but in Chinese pharma and healthcare companies as well as in labs, hospitals and clinics. The country is serious about cleaning up the medical landscape, an effort that is by no means targeting only foreign multinationals - although it needs to be said again this latter group carry much of the responsibility for having institutionalised the problem on such a grand scale. It should be noted too, that virtually all of the major scandals related to medicine, healthcare or food safety in China in recent years have involved foreign companies - mostly American - rather than Chinese firms. The Western media either ignore or severely downplay this point.


It also needs to be noted that the problem of payments to physicians for prescribing medications is even more firmly entrenched in the US than in China, the practice having been largely exported from the US to China, and is now a problem for which American companies carry much of the responsibility. Similarly, the practice of hospitals profiting from the sale of medications is an American tradition and one driven by greed rather than need. In China, hospitals have used markups from medications as a normal part of their revenue stream to support operations, whereas in the US those markups are profits in the pockets of the private owners of those hospitals. But Americans praise this as "best practices" and good management when it occurs in the US, whereas the identical practice in China is just another example of Chinese corruption.


To claim that American doctors and hospitals don't profit heavily from the same practice is absurd. Countless pharma companies have paid billions in fines during the past ten years precisely for their version of this fraudulent practice. The drug firms will often publish a price of $300 for a medication but sell it to a physician for a third of that amount or less, producing enormous profits for the medical clinics and private practitioners who will then bill Medicare for the full amount. As well, many firms provide doctors with large volumes of free medications, which the doctors are then free to prescribe and bill to Medicare or the insurance companies at the full retail price.


To add fuel to this China-bashing bonfire, we have a multitude of ideological fools like Huang Yanzhong, who is billed as a "senior fellow for global health" at the Rothschild's Council on Foreign Relations (where else?) and who tells us "We know that China’s corruption is so entrenched in the pharmaceutical space that in order to get things done you have to bribe officials; it’s an open secret. Rampant bribes, commissions and corruption ...". It is truly difficult to apprehend the convoluted mental processes that must take place in what can only be a diseased mind to produce such ideological drivel. Huang claims in an article that because "government power has permeated almost every aspect of the approval, manufacture, pricing, and marketing" of pharmaceutical products in China, "foreign firms find it hard to do business without bending rules and bribing" everyone in sight.


As evidence, Huang quotes a former GSK executive who claimed he had to bribe not only doctors and hospitals but officials at every level of government. "Had to" bribe them? To accomplish what? Huang's claim is not only deserving of ridicule, but is patently stupid from every angle. Nobody "had to" bribe anybody; GSK's bribes in China - as in America and a dozen other countries - were driven solely by greed, by a perceived chance to make billions in illegal profits, but Huang seems oblivious to the facts.


Even more, his veiled accusation about the Chinese authorities being involved in every aspect of the medical field is presented as a bad thing. Of course the authorities need to be involved; we need only look at the rampant criminality of the pharma companies in every country to realise government control is the only public safeguard. But even more, Huang holds out the US and its unregulated free market as a guiding light. Well, if that's true, why have pharma companies been fined $80 billion more in criminal fines in the US than in China? Why is corruption far more deeply entrenched in the US pharma market than in China's, and with no light at the end of that tunnel given the small fines and total immunity from criminal prosecution? From the facts it would seem that it is in America where firms "find it hard to do business without bending rules and bribing". Such pathetic, hypocritical rubbish.


One of the clever methods the US media employs to distract and trivialise the criminal activity of their close multinational friends is through the pretense of a criminal charge (in China) being quite unjustified, with one unlucky firm chosen as an 'example', to "send a message" or "transmit a signal" to all others in that industry to behave themselves. It was our CFR genius Huang who offered the treasured insight that since GSK probably represented "the tip of the iceberg", China was using its investigation of that firm to send a 'cease and desist' message to other pharma companies. Messages notwithstanding, it seemed to not appear to the man that GSK was charged because it was guilty. I will deal with GSK later; these people deserve a chapter of their own.


Then we have another ideological turkey, this time in the person of Erik Gordon of the University of Michigan’s Law School, telling us that "The talk about being appalled at the drug company practices in the US is an attempt to show that America is no better than China". Gordon, foolishly and without evidence, claims China wants to eliminate corruption of which it is ashamed, "but they don’t want to lose face over it", so they instead mount a media war against the US industry. I'm sorry to inform our (no doubt eminent) Prof. Gordon that the US is not only "no better than" China but is in fact much worse, and it is apparently only the Americans whose vast array of 'democratic values' neglected to include shame as one of those values. Whatever other accusations we can make about Americans, a desire to 'save face' would be absent from that list. Americans are not only not ashamed of their criminal acts, they appear proud of them or, at best, indifferent.


Consider how deeply entrenched in America is the assumed right to illegal activity and the categorisation of criminal penalties as mere business expenses, when a firm like Pfizer while still in the settlement process of one criminal conviction for which it paid a fine of $430 million, was discovered to have already originated and was widely executing an identical program to violate those very same laws with yet other medications. The fines were a pittance and the "corporate integrity agreement" just a charade. Corruption in the American pharma industry is like racism in American society: so much a natural part of the landscape that to even notice it would be like noticing the air you breathe.


It is almost comical to note the attention US authorities pay to the criminal actions of their own pharma companies in China and other nations in Asia and Africa. The payment of bribes by US companies, even if paid outside the US, is considered a crime against US law and therefore subject to the full force of legal sanction from the US Department of Justice. And sanctioned they are, at least to the extent of what we might call pocket change. For their domestic activities, these firms are occasionally fined billions of dollars in the US, but for their foreign activities - which are often greater - the same firms receive fines of only a few millions. Eli Lilly paid $25 million for bribes in China, Brazil, Russia and Poland, while Pfizer paid $60 million for crimes of all its subsidiaries in all countries, these punishments equating to about one week's sales of the medications in question.


And we have yet another ideologue, this one in the person of Liao Ran, living in Germany and employed by one of our favorite - and most idelogically corrupted - NGOs, Transparency International. According to a Bloomberg report, Mr. Liao, with absolutely no evidence to document his outrageous claim, tells us that doctors and nurses in China, due to low "standardised" salaries, "boost their income" by "regularly prescribing unnecessary medicine and surgery" while pocketing a percentage of these unjustified expenses. I think this is a good place to call Mr. Liao an unscrupulous liar. I know that isn't very nice, but it's the only label that fits. To suggest that doctors in China arrange surgery solely to collect a commission from the hospital fees, is a slander both repugnant and obscene but perfectly American in attitude and content.


He tells us further that it isn't only corruption but the structure of the entire system that is apparently badly flawed, even condemning the practice of Chinese giving hongbao (the red packets) to doctors. He seems to claim that China's "high medical costs" are due entirely to corruption, thereby placing all of China in the precarious position where "you cannot afford to be born, get sick or die". Bloomberg quoted him as saying health care costs were "A huge worry. If you have an extra 10,000 yuan, you won’t dare spend it on travel or leisure - you’ll put it away in case mom or dad get sick next year".


Not to be argumentative, but just as a point of interest, an ECG is a commodity, performed with similar equipment all over the world. In New York, an ECG costs between $650 and $1,800, depending on location. In Shanghai, an ECG costs 20 RMB – about $4.00. In New York again, an MRI costs between $500 for an ankle, about $4,800 for a breast (each), and about $200 per month for the rest of your life for a full-body scan. In Shanghai, a full-body MRI costs about $50.00. All else is comparable, to put paid to Liao’s claims of China’s ‘high medical costs’.


I won't dwell on the practice of the hongbao here, but it needs to be noted that few foreigners have any useful understanding of Chinese tradition and culture and too often simply interpret a foreign practice in the light of what it might mean if it occurred in their own country. National traditions can never be understood in this way, and certainly not when viewed through the severely-distorted chromatic lens of American ideology, religion, and so-called values. Unlike the West, these gifts are common in China for doctors, teachers, almost all superiors, as a kind of recognition of status or influence. It is true they are sometimes a competitive gesture, and sometimes a kind of obligation that is resented by the younger generation, but nevertheless are also badly misunderstood by non-Chinese and an explanation to binary-mentality Americans would be fruitless to attempt.


The whining by the pharma companies of price pressures forcing them to cut corners and cut costs to survive, is all fiction, which would be easily evidenced simply by looking at the profit margins of these firms. This public lobbying and intense pressure has recently been placed on China, the firms demanding China eliminate its drug price controls to let the market set appropriate rates. But this is all a fraud. "The Market" as defined in these claims does not exist in reality, and the pressure is simply driven by greed. Some officials in the Chinese medical industry hold the hope that competition in an unregulated market will of its own accord produce lower prices, but this is a fairy-tale, with no evidence anywhere in the world to support it. These firms have shown themselves quite able to collude on maintaining high price levels by competing only on branding or some other category that will serve only to greatly magnify the costs to the public.


And I think it needs to be said somewhere that Chinese traditional medicine has been in active employment for millennia, the Chinese race surviving just fine, thank you very much, without the God-given benefits of American pharma companies and their synthetic patented medicines. Since the 1950s, China has modernised its hospitals, added decades to life expectancy, halved infant mortality and eliminated diseases such as polio, and much more. Moreover, Chinese treatments, not having been corrupted by either patents or profit-maximising capitalism, are designed to cure ailments and diseases rather than simply keep them under control.


To this I would add that one area of concern is that the foreign pharma companies are already very busy in China, attempting to identify the active ingredients in many Chinese traditional medical treatments so they can patent those items (as Roche did with star aniseed in its Tamiflu), then attempt to use trade agreements and political pressure to extract royalties from Chinese hospitals for using these new "American" medications.


Next: Part 5 –Fines and Penalties

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Mr. Romanoff’s writing has been translated into 32 languages and his articles posted on more than 150 foreign-language news and politics websites in more than 30 countries, as well as more than 100 English language platforms. Larry Romanoff is a retired management consultant and businessman. He has held senior executive positions in international consulting firms, and owned an international import-export business. He has been a visiting professor at Shanghai’s Fudan University, presenting case studies in international affairs to senior EMBA classes. Mr. Romanoff lives in Shanghai and is currently writing a series of ten books generally related to China and the West. He is one of the contributing authors to Cynthia McKinney’s new anthology ‘When China Sneezes’. (Chapt. 2 — Dealing with Demons).

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Big pharma’s rise in China not held back by scandals


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By Larry Romanoff, May 27, 2021

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