National drug investigation may involve more senior executives in drug distribution, which is most likely to result in Bribery

On January 13, Sinopharm Holdings Co., Ltd (hereinafter referred to as Sinopharm holdings, 01099 HK) issued an urgent announcement that on the evening of January 10, Shi Jinming, former vice president of Sinopharm holdings, Xu Yizhong, former general manager of Sinopharm holdings Distribution Center Co., Ltd., a wholly-owned subsidiary of Sinopharm Holdings, was taken away for investigation by the people's Procuratorate of Pudong New Area, Shanghai It is understood that this case is the first case that medical executives have been investigated since China proposed to strengthen anti-corruption in recent two years Sinopharm holdings is the largest pharmaceutical commercial company in China at present This time, the former executives were suspected of corruption and fell into the vortex of public opinion, which undoubtedly linked investors with the previous GlaxoSmithKline case Is the arrest of former executives the beginning of anti-corruption in domestic medicine? Is the dominance of its pharmaceutical business affected? At the beginning of the new year, when executives were suspected of corruption, the anti-corruption cases of medicine began again According to the announcement of Sinopharm holdings on January 13, Shi Jinming has submitted his resignation on December 29, 2013, and resigned as vice president of Sinopharm holdings and all positions of its subsidiaries since January 7, 2014 Relevant information shows that Shi Jinming, now 46 years old, has been vice president of Sinopharm since January 2009 Before resigning, Shi Jinming was also the legal representative of Sinopharm distribution center and the direct leader of Xu Yizhong It is also understood that from December 2006 to December 2008, Shi Jinming was also the chairman, director and executive director of Guoyao group's congruity Pharmaceutical Co., Ltd (hereinafter referred to as "Guoyao congruity" (50.79, - 0.70, - 1.36%), 000028 SZ), a listed company of a shares under Guoyao holding On January 13, Guoyao, a subsidiary of Sinopharm group and a brother company of Sinopharm Holding Co., Ltd., also announced that Shi Jinming's resignation had been received on January 9, "and he applied to resign as a director for personal reasons" The reporter immediately called the people's Procuratorate of Pudong New Area of Shanghai The staff refused to accept the interview for the reasons and details of the investigation The staff of the Information Office of the people's Procuratorate of Shanghai said that they had not received the plan of public disclosure of relevant cases Although it's all about corruption, a number of insiders told reporters that the incident is totally different from the previous GSK case "The GlaxoSmithKline case was an active bribery and passive investigation, but this time it was internal corruption The company exposed its domestic shame and asked relevant departments to intervene in the investigation." On January 16, the head of Sinopharm group told our reporter: "this incident is an individual behavior, and has no significant impact on the normal operation and stable development of the company." At the same time, the above people also disclosed to reporters that the incident had nothing to do with the GSK case "This incident mainly involved the distribution center of Sinopharm holding, a subsidiary of Sinopharm, which was previously under the charge of Shi Jinming." After the investigation, Sinopharm said that the company had taken appropriate arrangements for the appointment of distribution business managers involved in the incident as soon as possible To the knowledge of the board of directors, up to now, the event has not had a significant impact on the business and operation of the group Affected by the news, on January 13, Sinopharm's share price fell nearly 4% to close 1.09% at HK $22.75 Shi Jinming and Xu Yizhong are suspected of corruption and reported by their real names in the vulnerable "danger zone" It is said that they have a very detailed understanding of their embezzlement of public funds and the establishment of private coffers in the report materials A person close to Sinopharm holdings told reporters, "although the amount has not been announced by relevant departments, the amount is definitely more than one million." According to the public information, Sinopharm group, the parent company of Sinopharm holdings, is currently one of the largest pharmaceutical groups in China In addition to Sinopharm holdings, it also owns 5 listed companies, including Sinopharm congruence, Sinopharm (18.59, - 0.21, - 1.12%) (600511), modern pharmaceutical (15.19, - 0.30, - 1.94%) (600420), Tiantan Biology (19.29, - 0.36, - 1.83%) (600161), and Chinese traditional medicine At the end of 2011, Sinopharm group was the first pharmaceutical company with an operating revenue of more than 100 billion yuan in China; in 2013, it was also the first pharmaceutical company in China to be selected into fortune 500, ranking 446 on the list Sinopharm holding is the largest pharmaceutical distributor in China It not only sells the products of the above-mentioned brother companies, but also acts as an agent to sell the products of major pharmaceutical companies in China It has developed rapidly since it was listed in Hong Kong in 2009 As of the first half of 2013, the distribution network of the company has expanded to 30 provinces, municipalities and autonomous regions in China, forming a strong network of 51 distribution centers The company's direct customers include 10692 hospitals, including 1332 of the largest and highest level tertiary hospitals, accounting for about 77% of all classified hospitals in the country, accounting for 94% of tertiary hospitals According to the website of Sinopharm holdings, the company has maintained business cooperation with 5341 domestic and foreign suppliers and more than 3692 distributors, operating more than 31586 different types of drugs and health care products, including prescription drugs (brand drugs and generic drugs) and over-the-counter drugs, as well as personal care products and medical supplies, and distributing 46 of the 50 world's best-selling drugs in China It is not hard to find that once any company's products enter the national drug distribution network, it means more markets and close to more consumers In the first three quarters of 2013, Sinopharm's total operating revenue was 122.56 billion yuan (RMB, the same below), up 21.4% year-on-year, and its net profit increased by 17.1% to 1.72 billion yuan The distribution business department of the involved personnel is the core Department of Sinopharm It is reported that the distribution business accounts for more than 90% of the total revenue of Sinopharm In this strong distribution system, Shi Jinming is the core leader of the core Department of Sinopharm Shi lichen, senior pharmaceutical partner of Peking University zongzongzong, told reporters that in the process of drug companies' products entering the medical system through various links, bribes are most likely to occur in the process of product screening, procurement, diversion, distribution and entering the medical system For example, through the guidance of leaders, some products with low competitiveness enter the procurement platform at a higher price, or abnormal large-scale procurement , or through the distribution behavior to ask the pharmaceutical manufacturer for the benefit fee and so on Although the suspected bribery of GSK has not been in the past, the handling of such problems in the process of its own integration is not only necessary but also necessary for the elimination of other subsidiaries "As the investigation goes further, some senior managers of related departments may also be involved," several industry insiders told reporters "Strict inspection for three years" at present, Sinopharm has readjusted the management personnel of the distribution center According to the head of Sinopharm group, Sinopharm group has established a special committee composed of the chairman, President and relevant departments to handle all matters related to the incident and cooperate with the inspection authorities for investigation In order to put an end to similar events, Sinopharm group will continue to urge Sinopharm holdings to improve internal audit and internal control management In fact, since the GSK case, several local pharmaceutical companies have been exposed to be suspected of bribery, and Sinopharm is not the first pharmaceutical company to carry out anti-corruption self-examination It is understood that Shanghai Pharmaceutical (13.10, - 0.39, - 2.89%) since the "hongyuanda incident" at the end of last year, Shanghai Pharmaceutical Group, a rival of Sinopharm holdings, recently announced that it was investigating the allegations by domestic media that its subsidiaries paid bribes to personnel of 31 hospitals In an interview with reporters, a relevant person from another large domestic pharmaceutical industry and trade group also said that Sinopharm's high-profile self-examination of the two executives was the performance of the country's in-depth fight against commercial bribery in the pharmaceutical business field after the GSK case It is expected that the investigation of two senior executives of Sinopharm will play a warning role in the whole industry Since the GSK bribery incident, the health and Family Planning Commission and the State Administration of traditional Chinese medicine have been cracking down on the corruption and corruption of pharmaceutical enterprises In November last year, many ministries and commissions such as the health and Family Planning Commission and the Ministry of supervision proposed that anti commercial bribery in the field of medicine should be "strictly investigated for three years" -- "2013 is only the first year, 2014 and 2015 will also be strictly investigated, and it will never be relaxed." For a series of actions of government departments, many insiders analyzed to reporters that Shi Jinming, former vice president of Sinopharm Holding Co., Ltd., was investigated for corruption, which may raise investors' wariness of its corporate governance, or also indicate that the central government's rectification of corruption in the pharmaceutical industry is still continuing Does the investigation into the alleged corruption of Shi Jinming and Xu Yizhong, the leaders of the core departments of Sinopharm holdings, mean that China will start strict internal control management accordingly? We will continue to pay attention to the follow-up progress.