The National Healthcare Security Administration (NHSA) has announced the results of a special investigation, revealing that three companies have been found guilty of price gouging and defrauding funds from the Basic Medical Insurance (BMI) scheme. The companies involved are Guangzhou Baiyunshan Tianxin Pharmaceutical Co., Ltd, Guangzhou Baiyunshan General Factory, and Guangzhou Baiyunshan Jingxiutang Pharmaceutical Co., Ltd.
Investigation Findings
The three companies violated the “two – invoice” system rules and colluded with over 50 downstream drug agents from 2017 to 2021. They cashed out on cefathiamidine and 86 other drugs by procuring active pharmaceutical ingredients (APIs) at inflated prices and transferring the capital to downstream drug agents. The case involves a significant amount of money, with some funds used to bribe medical staff or specific related persons to carry out illegal drug promotion.
Fraudulent Practices
In this case, drug manufacturers and agents signed a cooperation agreement to add designated “distributors” in the procurement of APIs. These “distributors” purchased APIs at normal prices, increased the price by up to 10 times, and then sold the APIs directly to drug manufacturers. The artificially high prices were reflected in the ex – factory prices of finished products, during tendering, and online procurement prices. The companies justified these increases as due to “rising prices of APIs and production costs.” The so – called “distributors” of APIs were actually controlled by drug agents, who cashed out the income from the price difference obtained by buying low – cost and high – selling APIs and transferring them to drug agents for pharmaceutical commercial bribery.
Rectification Measures
The three companies have been ordered to rectify the prices of the drugs involved nationwide and remove the inflated portion of the current prices used for bribery, with an average drop of more than 50%. Some product specifications have been suspended for procurement. Guangdong province has ordered the three companies to comprehensively rectify their marketing models and stop related illegal operations. Additionally, relevant departments are investigating and punishing those suspected of violating laws and regulations.-Fineline Info & Tech
