Siemens Investigates Report That Its Healthcare Biz Inflated Numbers by Faking Contracts

Published: Mar 04, 2015

Siemens (SI) Investigates Report That Its Healthcare Biz Inflated Numbers by Faking Contracts
March 3, 2015
By Jessica Wilson, Breaking News Staff

The Chinese business daily Yicai reported on Monday that Siemens inflated the sales of its healthcare equipment in China, according to Reuters. Yicai spoke with Chinese distributors who worked with Siemens’ healthcare division who explained that the division would create contracts, but not follow through with sales. The distributors would place a 10 percent down payment in order for Siemens to record the contracts, then the company would return the payments to them by other means, Yicai said.

“This was a common practice for everyone and was considered to be helping each other out,” a distributor named Wu was quoted as saying by Yicai.

Siemens has cracked down on the practice, however, reported Yicai, and in the second half of 2014 told distributors that “the 10 percent down payments would be forfeit,” according to Reuters. A group of 37 distributors have joined together to get the down payments returned. The distributor named Wu told Yicai that the total sum involved was more than 30 million yuan ($5 million).

For comparison, Siemens had sales of $7.23 billion in China last year, about eight percent of its total sales, according to Reuters.

“Regarding the points raised by some business partners as described in the news report, Siemens has attached high attention to them and has initiated internal investigations,” the company said on Monday, as reported by Reuters. “Siemens pays high attention to taking pre-emptive measures against unfair competition and any other inappropriate business conduct,” the company said in a statement.

The healthcare market in China is “riddled with underhand dealings and backhanders, fueled by low salaries among medical professionals and fierce competition for sales,” according to Reuters. The country is taking steps to deal with corruption in its healthcare sector, however. In February 2014, China introduced new healthcare sector anti-corruption regulations aimed at hospitals and physicians, as well as the medical product companies that supply them, in a “a concerted effort to tackle systemic commercial bribery in the country’s healthcare sector,” wrote Allan Goldner of Benesch Law.

One set of regulations, called Circular 50, came into play on March 1, 2014 and applies to “all manufacturers, distributors and sales representatives of pharmaceuticals and other medical products, including medical devices, medical equipment and various medical supplies.” Circular 50 requires all drug and medical products suppliers—and their associated personnel—to sign ‘integrity agreements’ with their client hospitals and institutions “detailing the names of their sales representatives and expressly promising not to engage in commercial bribery.”

China instituted these policies in the wake of widespread corruption allegations against multinational pharmaceutical companies, including GlaxoSmithKline, as well as Chinese pharmaceutical companies in the summer of 2013.

BioSpace Temperature Poll
Last week controversy erupted over the compensation package for Sanofi’s new CEO, Olivier Brandicourt, with several French government officials decrying the amount, calling it "incomprehensible." Brandicourt could walk off with as much as $4.5 million in a “golden handshake” payment in addition to making $4.76 million a year. That base figure is comprised by a fixed annual salary of $1.36 million a year, which is supplemented by a performance-related bonus of between 150 to 250 percent, as well as stock options and performance shares.

So BioSpace wants your opinion, what do you think?

Back to news