China’s investigation of foreign companies for alleged price fixing extends to pharmaceuticals industry

Beijing's investigation of foreign companies for alleged price fixing has extended to the pharmaceuticals industry, with the National Development and Reform Commission launching an inquiry into pricing practices at 60 domestic and foreign drugmakers, including GlaxoSmithKline (GSK), Baxter Healthcare and Sandoz.

China’s decision this week to investigate several foreign infant formula manufacturers for allegedly unfair pricing practices appeared to have an almost immediate impact as some announced they would cut prices by 20 per cent.

The commission issued a notice on its website saying it was launching an investigation into 60 pharmaceutical companies. The majority of the companies are domestic, but several foreign groups are also included. GSK, Baxter and Sandoz were mentioned by name.

The official Chinese newspaper Securities Daily said the focus of the commission's investigation might be the difference between prices for imported pharmaceuticals in China and in other markets globally.

GSK said yesterday it only knew of the investigation from the Chinese media report, and stressed the report said it was just one among 60 companies being examined for potential pricing issues.

The group also said it had not had any contact with the authorities on the matter.

The high price of infant formula and drugs have become politically sensitive issues for Beijing. Many Chinese shoppers are willing to pay a large premium for foreign goods such as infant milk powder and pharmaceuticals because they perceive them to be safer.

In regards to the investigation, Nestlé reacted to similar pressure on Wednesday when it said that its unit Wyeth "assessed its pricing practices and decided to improve certain sales and marketing practices...to meet the NDRC concerns with respect to the affordability of infant formula to the Chinese consumer". – The Financial Times Limited 2013