(Bloomberg) -- Two current and two former senior AstraZeneca Plc executives in the group’s China unit are under investigation in a probe into alleged breaches of laws around drug importation and data privacy, the company said.
This is in addition to Leon Wang, the British drugmaker’s China president, who remains in detention, an Astra spokesman told Bloomberg.
The allegations of illegal importation relate to the movement of cancer drugs into Hong Kong and then into China, the spokesman said. Bloomberg earlier reported that some Astra employees are alleged to have smuggled into the country the immunotherapy treatment Imjudo, which is approved in other parts of the world but not China.
Astra said these are all individual criminal cases and the company, headquartered in the UK, has not been questioned.
Details of the extent of the investigation in China came as Astra briefed investors Wednesday in an attempt to quell concerns following a report from the Yicai news service on Tuesday that sent the company’s stock plunging. Astra’s shares closed down 1.9% Wednesday in London.
Reaction ‘Overdone’
On the call, Astra officials confirmed that the China business is lower-margin and projected to grow more slowly than the total company, said Barclay’s Emily Field in a note, which suggests that the share reaction is “overdone.”
The detention of Astra’s most senior China employee is a significant escalation by Beijing and a worrying development for the drugmaker’s mainland operations. Wang has been credited for much of Astra’s success in China, which at one point accounted for one-fifth of its total revenue but shrunk to 13% in 2023.
Astra has benefited from sweeping health-care regulatory reforms in China that helped speed up approvals for life-saving innovative drugs, and offered deep price cuts to make its treatments eligible for reimbursement through state medical insurance. This helped significantly expand volumes and sales of its cancer medicines.
In a continued push to cement its market lead in China, the company recently secured approval to expand the use of a star cancer treatment called Enhertu to treat a certain subtype of lung cancer. Astra is working to get Enhertu use reimbursed by China’s state medical insurance, which covers roughly 95% of its 1.4 billion people. The company recently participated in the National Reimbursement Drug List negotiations in Beijing, a gruelling exercise for gobal drugmakers that often comes with steep tradeoffs.
Astra is under immense pressure in the negotiations, with Enhertu being the sole drug it’s pushing for reimbursement status. It will be a “very, very significant product for the company in the future,” Huang Bin, a vice president at AstraZeneca China, told a health-care news service published by the People’s Daily last month.
Medical Fraud
Separate fraud cases relating to medical insurance claims and alleged tampering with genetic tests date back to 2021, Astra said, with 100 ex-Astra employees already sentenced. The medical insurance fraud investigation is still ongoing.
The company said it doesn’t believe that any current or former senior executives are being investigated for medical insurance fraud. Astra added that it has put in place new structures to improve compliance since the cases of medical insurance fraud first emerged.
Bloomberg previously reported that medical insurance probe related to the lung cancer treatment Tagrisso, with some involved employees given lengthy prison sentences. In the Tagrisso case, Astra employees allegedly helped alter genetic test results so that patients who wouldn’t have qualified for reimbursement of the drug – which was granted only to people with a certain genetic mutation – could get insurance coverage.
The recent arrest of Wang is not, to Astra’s knowledge, linked to the medical insurance fraud, the spokesman said. The company’s operations in China are continuing as usual, he added.
Under Wang, Astra’s China sales grew from just 7% of total revenue in 2013 to 20% at its peak in 2019, giving it the highest exposure to China among its peers. But growth slowed in recent years after older medicines came under pressure from bulk procurement programs favoring generics, triggering a bigger focus on innovative medications.
Astra is one of a number of international companies facing a crackdown on legal compliance issues in the mainland as Beijing tightens the enforcement of laws governing areas such as data collection, national security and the proper use of state funding.
--With assistance from Lisa Pham.
(Updates with more detail from 9th paragraph.)
©2024 Bloomberg L.P.