China's healthcare reforms in the 1980s, led to hospitals of country were under-subsidized and its medical officials were underpaid. Hospitals had its hopes on profits generated from the supply of medical services to cover the financing gap, while doctors became kickback seekers to compensate for their low rates. These questionable "advertising" practices were taken to the following level in the China marketplace.
Streams of fiscal flows, legal or not, from pharm businesses to physicians and hospitals in prescribing their drugs, to acquire their favor became a structurally embedded issue of country’s healthcare system. The Chinese government launched a new set of reforms in year 2009. Meanwhile it’s promises to spend millions on the health care, its action to wipe out other and bribery kickback-seeking behaviors of the business left many players perplexed. The first to get the heat was GlaxoSmithKline Inc. ("GSK"), a big British pharm firm active in the China marketplace since 1984. In July 2013, the Chinese government administers to purchase GSK drugs and established an investigation regarding its activities that entice hospitals physicians on GSK's China business. The alleged practice of bribery is an industry open secret common to pharm companies. Is this investigation an indicator that multinationals are being targeted by the Chinese government in favor of local players?
Despite high voltage growth rates, this controlled business in the market economy with Chinese characteristics only has a simple-boned distributions infrastructure, while it is full of patient-attempting administrative hurdles, has price restrictions on an increased record of drugs, and offers poor institutional protection for businesses' intellectual property. Will long term investment in the country pay off? Should GSK continue China's China Company? Should it change its strategy in China?
PUBLICATION DATE: September 04, 2014 PRODUCT #: HK1049-HCB-ENG
This is just an excerpt. This case is about STRATEGY & EXECUTION
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