US medical companies find that selling in China requires bribes

For more than a decade, Diagnostic Products Corp.'s employees in China bribed doctors to buy laboratory-testing kits from the Los Angeles company. In May the company paid the price: U.S. authorities fined Diagnostic Products $2 million for violating U.S. antibribery laws.

It's an example of the danger lurking behind China's booming health-care business. As the Chinese middle class expands, the nation is spending nearly $100 billion a year on health care. Medical devices and hospital products are a particularly fast-growing market, spurring top names such as Johnson & Johnson and Medtronic Inc to expand in China.

But foreigners seeking to cash in are discovering rampant corruption and questionable ethical practices. China's health system encourages doctors to push expensive procedures on patients, many of whom pay out of pocket for health care.

In a system lubricated by money, U.S. companies often face pressure to play along. Boston Scientific Corp, a Natick, Mass., medical-devices company, used outside distributors for years even though it suspected them of providing unethical incentives to doctors. Fearful of getting into trouble, "we really blew up the entire business," says China country manager Shankar Kaul. Boston Scientific dropped all its distributors at the same time and switched to direct sales.

Read the full article: WSJ