China launches probe on GSK over price fixing

Chinese authorities have launched a probe into several foreign and Chinese drugmakers including British pharmaceutical giant GlaxoSmithKline Plc's operations in the country on charges of possible price fixing of drugs, the official China Securities Journal reported yesterday.

China's National Development and Reforms Commission (NDRC), the country's economic planning agency, has opened an investigation into pricing practices of 60 companies including GSK, Merck, Baxter Healthcare and Sandoz, NDRC said in its website.

It is expected that the probe may focus on the price differences of imported milk products in China compared with other global markets.

Earlier this week, GSK said that Chinese authorities were probing whether some high-level executives of the company were involved in ''economic crimes.''

In a brief online statement, Chinese public security bureau in Changsha in the south central province of Hunan, said that an investigation into senior managers of GSK for economic crimes has commenced.

A GSK spokesman said in London that the company was unaware of the nature of the investigation but ''will cooperate.''

China is one of the fastest growing markets of GSK where it has major manufacturing and research facilities employing around 5,000 people. The company's China sales were up 17 per cent in 2012 at $1.2 billion compared to the previous year.

Probe on GSK and other drugmakers is the latest instance of growing cases of bribery and corruption charges on multinational corporations in China.

This is the second Chinese investigation into price fixing by foreign entities that has surfaced this week.

NDRC has also launched a probe on five foreign companies including Swiss nutrition giant Nestle, France's Danone Dumex, Abbott Laboratories and Mead Johnson Nutrition Co of the US and Dutch cooperative FrieslandCampina for allegedly violating competition laws by manipulating the prices of baby milk products.

In response, Nestle and Danone announced yesterday that they would cut prices of some of their infant milk formula products. Nestle said that the price cuts will be on an average 11 per cent and would be up to 20 per cent for some products.

It also said that the price cuts by the company's Wyeth Nutrition unit will be maintained through 2014.

Demand for foreign milk products have been growing in China in recent years.

Many consumers are buying more expensive foreign infant milk formula because of their concerns over the quality of Chinese products after the baby-milk related scandals that occurred in 2004 and 2008 and also subsequent revelations of high levels of toxic contents in milk products.