Multinational Pharma’s China Trust Crisis?

The detention of Leon Wang, the China President of AstraZeneca (AZ), has raised critical questions about the company's strategy in China moving forward. The company quickly appointed a new successor, but the underlying issue remains: will AstraZeneca adjust its operations and approach in the country, especially given the current climate?

Multinational drug makers (MNCs) have seen their growth stall in China, which has been exacerbated by broader microeconomic challenges and delayed drug launches. The issue of getting new drugs approved and reimbursed quickly has become a significant obstacle. While Novo Nordisk’s Wegovy has been approved, its competitor Eli Lilly's Zepbound is still awaiting approval in China.

One of the main hurdles for MNC drug makers is the price slashing during National Reimbursement Drug List (NRDL) negotiations, which often comes after a drug is approved. MNCs have been relying on China’s largest public payer to cover their drugs, aiming to increase their market share. However, getting drugs covered and included in the NRDL remains a difficult task, as there is intense competition.

Caixin, a prominent Chinese economic magazine, recently published articles on AstraZeneca’s situation, with some sources suggesting that the issue might be more about medical insurance reimbursement fraud than simple corporate greed.

This development raises serious questions about compliance and ethics within MNCs operating in China, prompting the industry to reevaluate its practices and internal governance. Much like past scandals, including that of GSK, this case could trigger a broader soul-searching process across multinational companies operating in the country. With the Chinese pharmaceutical market so significant for global companies, navigating the complexities of the local system may require more transparency and stronger communication between local teams and headquarters.