Danone’s (BN) Dumex said it will immediately start an investigation into a Chinese media report that alleged the brand made payments to hospital doctors and nurses to sell its baby formula products.
Dumex paid hundreds of thousands of yuan annually to doctors and nurses at hospitals in the northern Chinese city of Tianjin amid “fierce competition” among baby-formula makers, the state-owned China Central Television reported yesterday, citing an unidentified former sales manager from the brand.
“Dumex China pays great attention to and is extremely shocked by the CCTV report” on the promotion of infant milk-formula products in hospitals in Tianjin, according to a Dumex statement forwarded by Danone spokeswoman Charlotte Pasternak. Dumex “will immediately launch the investigation on it.”
The allegations are the latest to claim doctors’ involvement in malfeasance amid China’s crackdown on corruption in the country’s $350 billion health-care market. China extended the probe to multiple drug companies and hospitals after saying it was investigating GlaxoSmithKline Plc (GSK) over claims employees used cash and sexual favors to bribe doctors and health officials to promote sales of its medicines.
Dumex made payments ranging from several hundred yuan to about 10,000 yuan ($1,634) in the various forms of “sponsorship fees” to hospital staff for product sales, according to the CCTV report, which cited interviews and documents provided by an unidentified former sales manager from the brand.
Danone rose 0.4 percent to 56.26 euros at the close of trading in Paris, after earlier gaining as much as 1.1 percent.
Dumex adheres to Chinese laws and regulations and it has set up a “strict management system, including severe punitive measures” for activities which violate Chinese laws and regulations, Pasternak said.
The accusations are the latest in a string of troubles for the French company in China. In August, Danone was fined 172 million yuan by the nation’s top economic planning body for fixing prices of milk powder. That prompted it to cut prices for its products in the Asian nation by as much as 20 percent.
The French maker of Activia Yogurt and Evian water also issued a precautionary recall of its milk formula products last month after Fonterra Cooperative Group Ltd. said the items might have been affected by a contaminated whey protein ingredient.
Danone’s baby-nutrition sales will fall in the third quarter because the recalls had a “significant” impact on sales in Asia, it said last month.
The company is the third-largest baby formula company in China, with 9.2 percent market share last year, according to industry researcher Euromonitor International. Mead Johnson Nutrition Co. (MJN:US) ranked first with a 14 percent share and Hangzhou Beingmate Group Co. was No. 2 with 10 percent, it said.
China is cracking down on possible misbehavior by companies. In July, China accused four senior Glaxo executives of crimes involving 3 billion yuan of spurious travel and meeting expenses as well as trade in sexual favors.
Sanofi and Eli Lilly & Co. were among drugmakers that subsequently said they had received visits from Chinese regulators. Separately, two units of Johnson & Johnson, the world’s biggest maker of health-care products, were fined by Chinese authorities for monopolistic practices.
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