GlaxoSmithKline Blacklisted by Chinese Authorities, Suspended From National Drug Procurement

Blacklisting multinational drug companies is part of China's 'decoupling' strategy: Expert

An employee of British drug firm GlaxoSmithKline enters office headquarters in Shanghai. Peter Parks/AFP/Getty Images

Multinational pharmaceutical giant GlaxoSmithKline (GSK) was recently blacklisted by the Chinese authorities and will not be eligible for the country’s national drug procurement program for the next one and a half years.

Through the Chinese drug procurement program, pharmaceutical companies participate in a program of centralized drug procurement that supplies drugs at high volumes and low prices.

As first reported by state television CCTV, on Oct. 31 China’s State Drug Administration (SDA) issued a notice stating that GSK’s Avodart (dutasteride) softgels exported to China did not meet China’s quality control requirements for drug manufacturing. The SDA suspended the import, sale, and use of Avodart, with the notice taking effect immediately.

On the same day, China’s Joint Procurement Office (JPO) disqualified the softgels and placed GSK on a “non-compliant list.” GSK will be suspended from participating in centralized drug procurement from Oct. 31, 2022, to April 29, 2024.

GSK had not responded to The Epoch Times’ request for comments by press time. Calls to China’s State Administration of Pharmaceutical Supervision were unanswered.

Dutasteride, a drug for treating prostate enlargement and seborrheic hair loss, is one of about 61 drugs in the fifth round of China’s national drug procurement.

GSK rolled out the drug under the brand name Avodart in the United States in 2002. Avodart’s patent expired in 2015 and the drug became available in generic form. In 2011, the drug was approved for the Chinese market.

According to online data from China’s SDA and reported by Chinese state media The Paper, GSK is the only importer of dutasteride capsules in China, although there are three Chinese domestic companies manufacturing the drug.

The Paper reported that with GSK suspended, three Chinese companies may have increased opportunities in the next procurement cycle.

GSK Not the First to Be Blacklisted

GSK is not the first multinational pharmaceutical company to be punished by the Chinese authorities.

In a Nov. 1 report, The Paper said that on June 29 of this year, China’s JPO announced that certain batches of bicalutamide tablets produced by Sun India had been disqualified from the fifth round of national procurement because their dry weight loss assessment did not meet the registration standards for imported drugs.

In the end, three Chinese domestic pharmaceutical companies replaced Sun India to supply the drug in the Chinese market.

On March 25, 2020, China also announced the cancellation of Bristol-Myers Squibb’s Abraxane (nanoparticle albumin-bound paclitaxel) in the second round of national procurement. Paclitaxel is used in combination with gemcitabine (Gemzar) to treat cancer of the pancreas.

Expert Analysis

In an interview with The Epoch Times on Nov. 5, U.S.-based Chinese current affairs observer Lu Tianming said that GSK’s punishment by the Chinese Communist Party (CCP) can be viewed from three perspectives.

“First, it reflects that the CCP is now very short of money, because this is not an isolated incident,” Lu said. “In the past year, the regime has excluded many imported drugs from its procurement because they are more expensive, while domestic imitation drugs are less costly. But even for Chinese companies, the authorities have suppressed prices through high volume purchases.”

Frequent mass COVID testing and city-wide lockdowns have devastated China's economy. This photo shows empty roads during a phased lockdown following an Omicron surge, in Shanghai, China, on Apr. 5, 2022. Qilai Shen/Bloomberg via Getty Images

Lower Prices May Not Benefit Consumers

Lu specifically pointed out that lowering procurement prices is not for the benefit of Chinese citizens. Kickbacks are an integral part of doing business in China. The cost of bribes is passed on to the consumer in the form of higher drug prices, and the government has turned a blind eye to this for many years.

“We all know that the cost of drugs in China is very high, and the profit margin is also very high, because those pharmaceutical companies have to take out a large part of the money to bribe, and these costs are transferred into the price of drugs.

However, the Chinese authorities have never attempted to control the highly-inflated drug prices,” he continued.

The CCP’s zero-COVID policies, requiring mass testing and quarantines, wasted an enormous amount of money and devastated China’s economy, Lu said. Lowered prices for pharmaceuticals do not mean greatly lowered prices for Chinese consumers. Instead, they will mean greater profits for the government as it resells the drugs to consumers, helping to recoup its losses from zero-COVID.

Decoupling the Chinese Drug Supply

The second reason, according to Lu, is political. A great deal of foreign capital has been withdrawn from China in the past two years, due to political reasons. And the CCP itself had long planned to switch its economy to an “internal circulation” model.

“Everyone has seen the results of the 20th National Congress, and many people believe that the CCP is going back to an era similar to the Cultural Revolution. The fact that Supply and Marketing Cooperatives are now popping up all over the country shows that [the CCP] aims at achieving so-called internal circulation and self-sufficiency,” Lu said. He pointed out that the shift comes as the CCP has supported Russia’s actions against Ukraine and as China makes aggressive moves in the Taiwan Strait.

“The CCP thinks that it needs to begin making preparations for decoupling now, rather than waiting until international sanctions are imposed. That’s why it is now excluding foreign companies and giving its procurement orders to domestic companies, a sign that it is ready to start internal circulation,” Lu said.

Karmic Retribution

The third reason, Lu believes, comes down to karmic retribution: “what goes around comes around.” GSK did business in China for many years, while choosing to ignore the CCP’s notorious human rights record.

“In China, human rights issues have existed for a long time. The CCP’s persecution of Falun Gong for more than 20 years is the biggest human rights issue in the world. Over the years, many conscientious companies have been condemning the regime and even withdrawing from the Chinese market, but there are still many foreign companies that keep investing in China, which is tantamount to [giving a] blood transfusion to the CCP,” Lu said.

Moreover, GSK is alleged to have been involved in several scandals, such as bribery in the Chinese market, he added.

He said, “To put it bluntly, what they have gained by immoral means, they will eventually lose for whatever reason, and this is a kind of cause-and-effect cycle.”

Lu said the biggest risk to foreign investment in China actually comes from the uncertainty and unpredictability of CCP policies, the lack of compliance with rules, and the lack of a bottom line. “Now the regime is facing a crisis, it may sacrifice these foreign investments for its own interests. In such an environment, such risks are inevitable.”

Kane Zhang contributed to this report.