China is looking inward to chart growth for its device sector, laying out guidelines to spur local innovation and move away from global imports. Now, the country is going after three med tech multinationals, launching a probe to investigate suspected bribery by some of the industry's top players.
As Bloomberg reports, Chinese regulators including the State Administration for Industry & Commerce (SAIC) opened preliminary investigations last year into General Electric ($GE), Royal Philips ($PHG) and Germany's Siemens over suspicions that the companies may have paid bribes or used illegal tactics to snag a bigger piece of the market, according to people familiar with the matter. The probe follows on the heels of more pushback, as last year SAIC accused Siemens of violating competition law by donating medical devices in exchange for agreements to exclusively buy its chemical reagents for the machines--a tough line on a practice that is common, albeit illegal, Reuters notes.
Chinese authorities and the companies are staying mum on the probes, and regulators haven't decided yet whether or not they will launch a formal investigation against the devicemakers, Bloomberg reports. Siemens acknowledged that Chinese regulators "were looking into" the business model of its healthcare unit but "contrary to the recent media reports, the probe is neither corruption-related nor related to any personal benefits to individuals," the company said in a statement sent to Agence-French Press. And Philips said it "is not aware of an official investigation on this matter at this time," the company told Bloomberg in an email.
"We are committed to complying with the laws and regulations of the countries in which we operate, and to ethical business practices," the company said, as quoted by Bloomberg.
The regulatory pushback also comes as China calls for more homegrown medical devices and attempts to cut down on imports to promote local products. The country last year said it would lay out new incentives for its hospitals to use Chinese-made medical devices, countering "unreasonable increases" in healthcare costs while reducing the burden on patients, the Chinese health ministry said at the time.
Local companies are already cashing in on the trend, with devicemakers such as Shanghai's Kinetic Medical and Mindray ($MR) looking for their share of the profits. Kinetic Medical last year boasted a nearly 50% share in China two years after filing its IPO, and Mindray has said it would turn to private hospitals in the country to boost numbers and improve its bottom line.
But the current probe could deal a blow to global devicemakers eager to grab a bigger piece of a growing market. The device sector in Asia is expected to reach $15 billion in 2017, up from $2 billion in 2012, and consulting firm Access China Management Consulting forecast China's market would pass the $55 billion this year. Siemens, Philips and GE hold more than 80% of China's market for large medical equipment such as CT and MRI scanners, Bloomberg notes, and regulatory action is unwelcome news for the companies as they compete with local players for dominance.
- read the Bloomberg story
- get more from Reuters
- and here's the AFP story