Influencing China's healthcare industry

Allegations that British drugs giant GlaxoSmithKline has paid millions of dollars in bribes to increase its market share in China have thrown the spotlight on the country's murky pharmaceutical industry.

China's health spending is projected to soar from $357bn (£232bn) in 2011 to $1tn in 2020, according to a report by McKinsey, the global management consultancy group.

And with sales slowing in the West, the global drugs giants want a share of the booming profits in China.

But now the Chinese authorities say they are investigating up to 60 pharmaceutical firms in an effort to curb drugs prices.

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My basic monthly salary is about $600 - without bribery I couldn't live a decent life"

End Quote Doctor in China

Chinese doctors who spoke on condition of anonymity to the BBC - fearing they would lose their jobs for speaking out - say the healthcare system is awash with corruption.

They say that the pharmaceutical firms, both foreign and Chinese, have enormous influence.

'Bribery chain'

That is because Chinese hospitals traditionally rely on pharmaceutical sales as a major source of income.

Government funding is often barely enough to cover basic operational costs at most hospitals.

So doctors rely on drug prescriptions - and the kickbacks that come with them - to bulk up their pay.

But the doctors we spoke to stressed that they were at the "very end of the bribery chain".

"State and food administrators need to decide if the drugs are safe," said one doctor.

"And then, when the drugs reach the hospital, the directors get involved. Everyone takes their cut. And by the time it reaches the doctors there is very little money to be made."

While Chinese companies will offer incentives in the form of cash to prescribe certain drugs, foreign companies will offer lecture fees or conferences at hotels, the doctors claim.

The medical staff we spoke to say they depended upon the income. Despite China's booming economy, they receive meagre salaries.

"My basic monthly salary is about $600," said one surgeon with 30 years of experience. "Without bribery I could not live a decent life."

But increasingly, doctors in China are bearing the brunt of public anger over bribery. Patients often complain of being given tests they do not need and being prescribed expensive drugs.

According to Chinese state media, there were more than 17,000 violent incidents in Chinese hospitals in 2010. Several hospitals in Beijing have also reportedly beefed up their security.

Market survival

Fixing the system is one of the priorities of China's new leaders. The Chinese government has promised to rein in soaring health costs as the authorities roll out a national health insurance plan.

They plan to introduce national reforms to lower drugs prices and pay doctors more.

Tackling the powerful pharmaceutical industry also fits with President Xi Jinping's pledges to do more to root out widespread corruption, which is a source of enormous public anger.

James McGregor, a businessman and author who has spent more than 20 years in China, said foreign companies make a convenient first target for the authorities.

"It's all about market survival for foreign firms because there are local businesses that want their market share," he said.

"At the same time there are political reforms that look like they are going to happen in the state sector. And I think the authorities are going to be going after some very tough players. So if you go after the foreigners first it may soften the way a little bit. "

But the doctors we spoke to said the healthcare system needed a total overhaul. They said the key problem was that the government was not spending enough money to guarantee decent healthcare.

But they all agreed there was no easy fix.

"I'm a Communist Party member," said one doctor. "I probably shouldn't say this but the system is rotten to the core. It's hard to cure a deeply ingrained disease."