Medical Companies See Troubling Side Of Chinese Market
As U.S. Makers Aim to Profit
From Boom, Some Find
Doctors Expecting Bribes
Rise in Heart-Disease Cases
SHANGHAI -- For more than a decade, Diagnostic Products Corp.'s employees in China bribed doctors to buy laboratory-testing kits from the Los Angeles company. In May the company paid the price: U.S. authorities fined Diagnostic Products $2 million for violating U.S. antibribery laws.
It's an example of the danger lurking behind China's booming health-care business. As the Chinese middle class expands, the nation is spending nearly $100 billion a year on health care. Medical devices and hospital products are a particularly fast-growing market, spurring top names such as Johnson & Johnson and Medtronic Inc. to expand in China.
But foreigners seeking to cash in are discovering rampant corruption and questionable ethical practices. China's health system encourages doctors to push expensive procedures on patients, many of whom pay out of pocket for health care.
In a system lubricated by money, U.S. companies often face pressure to play along. Boston Scientific Corp., a Natick, Mass., medical-devices company, used outside distributors for years even though it suspected them of providing unethical incentives to doctors. Fearful of getting into trouble, "we really blew up the entire business," says China country manager Shankar Kaul. Boston Scientific dropped all its distributors at the same time and switched to direct sales.
U.S. health-care companies see big opportunities because research suggests that China is experiencing a rise in heart problems and other diseases of wealthy societies. Heavy pollution, private cars and smoking are taking a toll on health. Rates of obesity, high cholesterol and high blood pressure have soared.
A study in the Sept. 15 New England Journal of Medicine found that heart attacks, strokes and other cardiovascular problems accounted for 44% of all deaths during the 1990s in a sample of nearly 160,000 Chinese. Heart disease is now the No. 1 killer of Chinese women, according to the study. Despite China's vast increase in wealth since market reforms began in the late 1970s and improved treatment of infectious diseases, its life expectancy has only grown about five years and now stands at 72 years.
Gao Runlin, chairman of the Chinese Society of Cardiology and a surgeon at Fuwai Hospital in Beijing, says even young people are developing cardiac problems. "Now I am seeing people in their 40s, 30s, even 20s," he says.
The trend is prodding U.S. companies to bring to China the same cardiac devices that have transformed the treatment of heart disease in the U.S. Along with implanted pacemakers and diagnostic equipment, these devices include the stent, a wire and mesh tube that is inserted into clogged arteries to pry them open.
Johnson & Johnson and Boston Scientific both export to China advanced stents that contain drugs to prevent scar tissue from reblocking the passageway to the heart after surgery. J&J has opened surgical centers to train doctors in Shanghai and Beijing.
With growth in the U.S. expected to subside eventually, China is a strategically important market, although it currently accounts for only 2% of global medical-device sales. The U.S. accounts for 42%, according to a report in August by Dublin-based Research and Markets.
But several U.S. companies are brushing up against trouble in China. This partly reflects the growing role of money in the Chinese health-care system, in which doctors have an incentive to exaggerate the illnesses of their patients in order to create demand for high-priced procedures.
Subsidized Care
Until the 1980s, China offered heavily subsidized health care through state-owned enterprises and farming communes. Clinics received an annual budget from the state and weren't allowed to accept other payment. Given the meager funds available, doctors focused on treating contagious diseases and used whatever cheap medicines they could find for heart disease and other chronic ailments.
As part of a push to make hospitals more commercial, the Chinese government in the 1980s allowed them to charge patients. The payment system changed too, so that doctors and hospitals got paid for individual procedures rather than getting a lump-sum annual subsidy from the state. This is similar to the payment system that often prevails in the U.S. and other developed nations.
As a result, Chinese state-run hospitals and doctors scrambled to generate revenue. For insured patients, that meant promoting procedures and drugs with high reimbursement rates. As the economy grew, many families became able to pay for Western-style surgery with their own money. During the 1990s, private health spending in China grew 20% a year, according to an April 2005 study by World Bank specialists. China's policy changes have resulted in many doctors and hospitals "overdelivering sophisticated care on which they make a profit," the study says.
Hoping to tap China's demand, Minneapolis-based Medtronic has long used local distributors to sell its products to doctors. One of those distributors used to be a company called Shanghai Boyi Medical Devices Co. A 2002 Boyi sales ledger reviewed by The Wall Street Journal says a Boyi salesperson made payments of $60 to $1,200 to cardiologists at 14 Shanghai hospitals.
Hang Min, a former Boyi saleswoman, says the payments were made to get the doctors to use Medtronic pacemakers and averaged 15% of the sale price. Ms. Hang says she was fired by Boyi after telling two patients about Boyi's alleged use of smuggled pacemakers to get around paying import duty. Boyi was later dissolved and is no longer in existence.
Some prominent surgeons appear on the Boyi list. It says the chief of cardiology at Shanghai No. 10 Hospital accepted 33 payments in one six-month period in 2002 in return for the purchase of Medtronic pacemakers. The cardiology chief then and now is Xu Yawei, who is known as a national leader in surgical techniques that restore blood flow to the heart. Dr. Xu appears on television shows performing heart surgery, and last year his group led all Shanghai hospitals in performing 500 coronary interventional procedures.
Dr. Xu says he doesn't know anything about the sales agent's records. "I have never accepted kickbacks," he says, chain-smoking Zhonghua-brand cigarettes in a windowless office next to his cardiology lab.
Yvan Deurbroeck, a Medtronic spokesman, says the company learned of Boyi's sales practices in 2003 and "immediately terminated our contract." Medtronic subsequently overhauled its sales network in China. It now monitors hospital purchases to prevent sales agents from excessively inflating prices. Unusually high prices can be a sign that they are kicking back some of the revenue to doctors. Medtronic also boosted production at its Shanghai plant to undercut smuggling, according to country manager Victor Tsui.
In a statement, Johnson & Johnson says it has "taken disciplinary actions against a few distributors" and last year introduced "flying inspections" to audit them randomly. Both J&J and Medtronic say they intend to continue using outside distributors in China. Mr. Tsui says that's the best way to ensure that patients across China have access to Medtronic's products.
A Unit's Troubles
Diagnostic Products, the Los Angeles testing-products company, got into trouble because of its own subsidiary in China rather than an outside distributor. In May, the Department of Justice and the U.S. Securities and Exchange Commission ordered Diagnostic Products to pay a $4.8 million penalty, which included a $2 million fine and the return of $2.8 million in profits. Authorities said that between 1991 and 2002, a subsidiary in Tianjin paid $1.6 million in bribes to get hospital business for its laboratory tests of heart disease, diabetes and other ailments.
The bribes were mostly hand-delivered to hospital workers responsible for purchasing decisions and amounted to between 3% and 11% of a product's price, according to a statement by the Department of Justice. U.S. federal law bars American companies from bribing officials of foreign governments, a ban that includes doctors at state-owned Chinese hospitals.
Chief Financial Officer James Brill says Diagnostic Products' headquarters voluntarily disclosed the payments to U.S. authorities after detecting them. Mr. Brill says the company doesn't condone kickbacks but notes that Chinese employees may have viewed them in a different light. "We weren't paying hundreds of thousands of dollars to some Chinese official to get a contract," he says. "Each was probably the amount of a good dinner in Los Angeles."
Boston Scientific has sworn off distributors. "There were doubts about the ethics of some of the distributors," says Henrik Glarbo, who was country manager until 2003 and now works for a pharmaceutical company. He declined to discuss details but a Boston Scientific sales manager at the time says distributors commonly paid for Chinese physicians to attend conferences in the U.S. The gifts would include all meals and sightseeing trips, this former employee says.
Mr. Glarbo says Boston Scientific wanted to sell directly to hospitals so it could use its own salespeople and have better control of inventory. Although foreign companies were technically barred from direct sales of medical devices until last year, Chinese authorities allowed Boston Scientific to use a loophole by selling the devices from a duty-free zone in Shanghai.
At the beginning of 2003, Boston Scientific fired all its distributors. Since then it says it has applied the same rules it uses in other countries. Boston Scientific has barred gifts over $25 and required menus to be submitted with restaurant receipts for meals, according to current and former executives. The switch to direct sales came just ahead of the launch in China of the company's Taxus stent, which goes head-to-head in many hospitals with J&J's latest stent, the Cypher.
While many Chinese cardiologists initially balked at dealing with unfamiliar salespeople, Mr. Kaul, who arrived as Boston Scientific's country manager in early 2004, stuck with the plan. He says the distributors were a disaster waiting to happen. "If you see a train coming, you don't want to be standing in the middle of the tracks," says the 44-year-old Indian-born executive, a former rug salesman who fled his home in Kashmir in 1990 after Muslim militants torched his house.
Mr. Kaul doubled the size of his sales team and visited doctors to assure them that Boston Scientific would help train them in using stents. Boston Scientific also priced its Taxus stent around 30% below Johnson & Johnson's Cypher. In Shanghai hospitals, the Taxus stent costs about $2,300, while the Cypher costs about $3,400.
By the end of 2004, the company almost doubled cardiac-product sales compared with 2003's figures, according to Mr. Kaul, who declined to provide specific numbers.
In January of this year, China's health authorities rolled out to eight provinces and cities a new system for setting the prices of stents, pacemakers and artificial joints. Under the system, qualified suppliers submit suggested prices to a panel of experts, which after negotiations sets and publishes a final price. Since then, prices for stents and pacemakers have dropped an average of 25%, according to the Medical Instruments Trade Association of Shanghai, which jointly supervised hospital bidding with Shanghai health authorities.
Regulators figure that if patients know what a device costs, it will be harder to gouge them on surgical procedures -- which in turn will discourage corruption by making it harder for distributors to jack up prices and give kickbacks. Until recently, says Deng Xiaohong, deputy director of Beijing Health, "We didn't know how much companies were selling their products for to hospitals. And they didn't want us to know, either."
中国医疗市场弊病重重
十多年来，Diagnostic Products Corp.的员工经常贿赂中国医生，让他们选择从Diagnostic购买实验室测试设备。今年5月，它最终付出了代价：美国监管部门裁定该公司违反了美国反贿赂法，对其处以200万美元罚款。
中国医疗保健市场蓬勃发展的背后潜藏的危害由此可见一斑。随著中产阶层日益壮大，中国在医疗保健上的支出每年达到近1,000亿美元。医疗设备和医院用品市场的发展尤其突飞猛进，并已吸引强生(Johnson & Johnson)、美敦力(Medtronic Inc.)等多家顶级医疗设备生产商进驻中国。
但这些在中国试水的外国企业发现，中国存在著广泛的腐败现象及值得质疑的道德行为。中国的医疗体系间接地鼓励医生对患者使用昂贵的治疗方法，很多人为了治病几乎倾家荡产。
在处处需要用钱打通关节的中国医疗体系中，很多美国公司面临著与客户拉关系的压力。波士顿科学公司(Boston Scientific Corp., BSX)多年来一直聘请外部分销员来为其在中国推销产品，不过它已经察觉到某些分销员在向医生提供不道德的激励措施。“我们实际上在自毁长城，”该公司中国区经理尚卡尔?卡尔(Shankar Kaul)表示，为了避免遇到麻烦，波士顿科学辞掉了所有分销人员，改为直销。
研究显示，中国的心脏病及其他所谓富贵病正在日益增多，这让美国医疗保健公司看到了巨大商机。人口的增长、私家车的普及和吸烟习惯等都在威胁人们的健康。肥胖症、高胆固醇和高血压的发病率日益上升。
《新英格兰医学杂志》(New England Journal of Medicine)9月15日发表的研究报告显示，在由16万中国人组成的被调查样本中，心脏病、中风和其他心血管疾病在所有死亡病例中占到了44%。研究显示，心脏病目前已成为中国女性的第一大疾病。尽管自七十年代市场经济改革以来中国的财富迅猛增长，对传染病的治疗也有所改善，但中国人的平均寿命仅增长了5年，目前为72岁。
中华医学会心血管病学分会(Chinese Society of Cardiology)会长、北京阜外心血管病医院外科教授高润林表示，年轻人的心血管问题也越来越多。他说，他所接触的病人中就有40岁、30岁、甚至20几岁的。
在这种形势下，美国公司纷纷将美国本土改变心脏病治疗方法的各种设备搬至中国。除植入的心脏起博器和诊疗设备外，他们还带来了先进的心血管支架。
强生公司和波士顿科学公司均已向中国出口了防止术后疤痕组织堵塞心血管的高级支架。强生还在上海和北京开设了负责培训医生的医疗学术中心。
随著美国市场的增长日渐放缓，中国已然成为重要的战略市场，虽然中国目前在全球医疗设备市场所占的份额仅为2%。都柏林研究机构Research and Markets 8月份的报告显示，美国在这一市场所占的份额为42%。
但很多美国企业在中国举步维艰。这从某种程度上与金钱在中国医疗体系中扮演著越来越重要的角色不无关系。受利益驱使，很多医生为了创造对高价医疗手段的需求不惜夸大患者的病情。
八十年代以前，中国的医疗福利主要通过由国有企业和农村公社提供医疗补助来实现。医疗诊所每年从政府获得预算，不允许接受其他款项。考虑到资金微薄，医生将主要精力放在了传染病的治疗上，在治疗心脏病和其他慢性疾病时则尽可能使用廉价药物。
八十年代起，为推进医疗体系商业化，中国政府开始允许医院向患者收费。支付体系也随即发生变化，医生和医院可以从每项治疗中收费，而不像过去那样每年从政府获得笼统的补助。这与美国和其他发达国家的支付体系日渐接近。
结果，国家所有的医院及医生开始竭力创收。对于享受医疗保险的患者，这就意味著要使用高报销率的治疗手段和药物。随著经济的增长，很多家庭开始有能力自己负担从西方引进的外科疗法。据世界银行(World Bank) 2005年4月发表的一项专家报告显示，九十年代，中国的私人医疗支出每年增长20%。报告指出，中国的政策改变导致很多医生和医院出于盈利性考虑过度使用高端治疗手段。
为顺应中国的需求，美敦力一直采用当地促销人员向医生推销产品，其中包括上海博溢医疗用品有限公司(Shanghai Boyi Medical Devices Co.)的分销员。2002年接受《华尔街日报》采访的一位上海博溢的推销员表示，他的一位同事曾向上海14家医院的心脏病专家支付过60至1,200美元作为回扣。
博溢的前销售员航敏（音）说，这是为了让医生们使用美敦力的起博器，回扣平均相当于设备售价的15%。航说，她因为告知两名患者博溢在推销走私起博器而被博溢解雇。美敦力后来解除了与博溢的合作关系，博溢目前已不复存在。
很多知名外科专家都出现在博溢的回扣接受者名单上。该公司表示，上海第十人民医院心血管主任医师徐亚伟在2002年的6个月内接受了33次贿赂，条件是购买美敦力的心脏起博器。据了解，徐亚伟是心脏外科领域的全国知名专家，电视台曾现场直播过他的心脏手术过程。去年，他率领的团队完成了500例冠心病介入治疗手术，数量位居上海各医院之首。
徐亚伟表示，博溢的数字是无稽之谈。“我从未接受过回扣，”他在一间密闭的办公室里一边抽著中华烟一边说。隔壁就是他的手术室。
美敦力的发言人伊万?戴布洛克(Yvan Deurbroeck)说，公司2003年了解到博溢的这种销售举动后，“立即中止了我们的合同。”美敦力随后对其在中国的销售网络进行了彻底检查。目前该公司开始监控医院的购买行为，以防销售代理公司肆意提价。不同寻常的高昂价格本身就是销售人员向医生提供回扣的一种迹象。公司中国区经理Victor Tsui表示，为杜绝走私行为，美敦力还在其上海工厂提高了产量。
强生公司在一份公告中称，该公司已对部分违规销售人员实施了制裁，并于去年推出“突击检查”计划，对销售人员进行不定期检查。强生和美敦力均表示，计划在中国继续聘用外部销售人员。Tsui说，这是确保中国患者接触到美敦力产品的最佳途径。
Diagnostic Products则因在中国的自身子公司而遭遇麻烦，并非受外部销售人员所累。5月份，美国司法部(Department of Justice)和美国证券交易委员会(Securities and Exchange Commission)责令Diagnostic Products支付罚金480万美元，包括200万美元罚款和280万美元利润返还。监管部门表示，1991年至2002年期间，Diagnostic Products在天津的子公司为推销其研究心脏病、糖尿病和其他疾病的实验室设备向医院提供贿赂160万美元。
司法部的公告显示，贿赂款项主要是私下递给医院的采购人员，金额为产品价格的3%-11%左右。美国联邦法律明令禁止美国公司贿赂国外政府官员，包括中国国有医院的医生。
Diagnostic Products的首席财务长詹姆士?布里尔(James Brill)说，发现贿赂行为后，总部主动向监管部门披露了情况。布里尔表示，公司从不纵容回扣行为，可能中国员工的理解方式不同。“我们并没有为获得一笔合同而向中国官员支付几百万美元，”他说。“付给他们的每笔钱只相当于在洛杉矶吃一顿大餐的费用。”
波士顿科学已经声明不再采用外部销售员。“我们对某些销售人员的道德品质没有把握，”2003年前一直担任波士顿科学中国区经理的贾宝翰(Henrik Glarbo)说。他拒绝谈论细节问题，但波士顿科学当时的一位销售经理说，销售员普遍会向中国医生提供去美国参加学术会议的机会，包括提供所有食宿和观光旅游。贾宝翰现效力于一家医药公司。
贾宝翰说，波士顿科学打算向医院直销产品，这样它可以采用自己的销售员，而且便于管理库存。尽管原则上讲，到去年为止外资企业尚不允许在中国进行直销，但中国当局允许波士顿科学通过在上海的免税区销售设备来绕过此项规定。
2003年初，波士顿科学解聘了所有外部促销员。该公司表示，从此以后公司在中国采用了与在其他国家相同的销售原则。据波士顿科学前任和现任管理人士称，公司禁止赠送价值超过25美元的礼物，在餐馆就餐后除索要发票外还要请餐馆提供菜单。就在波士顿科学采用直销不久后，公司推出了Taxus支架，该产品在很多医院与强生公司的最新支架Cypher形成了针锋相对的竞争。
虽然中国很多心血管专家起初会将陌生销售人员拒之门外，但2004年担任波士顿科学中国区经理的卡尔仍坚持直销策略。他说，外聘促销员就像一棵潜伏的炸弹。“如果你看见火车过来了，你绝对不想再站在铁轨上，”这位44岁的印度裔管理人士说。
卡尔将他的销售队伍扩大了一倍，并亲自与医生会面，向他们保证波士顿科学将训练他们如何使用支架。公司还将其Taxus支架的价格下调到较强生的Cypher低30%的水平。在上海的几家医院，Taxus报价2,300美元，而Cypher的报价为3,400美元。卡尔称，截至2004年末，波士顿科学的心脏产品销售额较2003年增长了近一倍。但他拒绝透露具体数据。
今年1月，中国医疗监管部门将一套新的支架、起博器和人工关节定价体系推广到了八个省市。在这一体系下，合格供应商必须向专家组提交建议价格，由专家组讨论后确定最终售价。上海医疗器械行业协会(Medical Instruments Trade Association of Shanghai)的数据显示，自此以后支架和起博器价格已下降25%。该协会与上海医疗监管部门共同监督对医院的医疗设备报价。
监管部门指出，如果患者了解设备的造价，医生就很难在外科治疗上欺骗他们──让促销员难以提价和提供回扣，自然也有助于杜绝腐败现象。北京卫生局副局长邓晓红表示，直到最近“我们才知道有多少公司在向医院销售产品。他们也不希望我们知道这些。”
