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Global firms cut China baby formula prices amid probe
by Staff Writers
Shanghai (AFP) July 04, 2013

China government to probe 60 firms over drug prices
Shanghai (AFP) July 04, 2013 - China's top economic planner is to investigate 60 pharmaceutical companies for excessive charges, including several joint ventures with foreign firms, state media reported Thursday.

The National Development and Reform Commission (NDRC), which is already investigating foreign baby formula producers over prices, will send teams to check wholesale prices and production costs of dozens of companies, the Securities Daily said.

In a statement the NDRC said firms targeted in the investigation include Sino-foreign joint ventures with Britain's GlaxoSmithKline, Germany's Boehringer-Ingelheim and global healthcare firm MSD.

The inquiry will also look at several Chinese companies, among them industry leader Sinopharm Group and Jiangsu Hengrui Medicine, which specialises in anti-tumour drugs.

Chinese police are already investigating senior staff of GlaxoSmithKline in China for suspected "economic crimes" but it was unclear whether there was any connection between the two probes.

The NDRC, which helps regulate prices in China, said the four-month survey aimed to "timely set and adjust drug prices".

Analysts said providing healthcare at affordable prices was a political platform of China's ruling Communist Party.

"There always has been a lot of pressure to make sure that common drugs are available at very cheap prices relative to what they would be sold for in a lot of Western markets," said Ben Cavender of the China Market Research Group consultancy.

It is also common practice for Chinese pharmaceutical firms to offer doctors and hospitals bribes to have their products used, industry officials say.

State media reported Tuesday that the NDRC had launched a probe of foreign baby formula makers for high prices resulting from a monopoly-like situation.

The government agency declined to confirm the reports but companies targeted said they were cooperating.

A unit of Swiss-based Nestle, Wyeth Nutrition, responded by slashing its baby formula prices in China by as much as 20 percent, while France's Danone said it planned to cut prices as well.

Two global food giants facing a Chinese government probe over alleged price-fixing of baby formula have said they are cutting prices in the world's largest market for the product.

A spokeswoman for France's Danone told AFP on Thursday that its Dumex subsidiary would reduce baby formula prices in China, adding details would be announced later.

A unit of Swiss-based Nestle, Wyeth Nutrition, said it had already slashed prices by as much as 20 percent after the government launched an investigation into several foreign firms.

Wyeth confirmed the investigation by China's top economic planner, which had been reported by state media, and pledged in a statement "immediately" to cut prices on some formula products by six to 20 percent.

The responses came after media reports Tuesday that the National Development and Reform Commission (NDRC) had launched a probe of foreign baby formula makers for high prices resulting from a monopoly-like situation.

Wyeth said it was "actively cooperating with the anti-monopoly investigation" and promised not to raise prices on new formula products for a year.

A spokeswoman for Wyeth's parent Nestle confirmed the moves but declined further comment.

A 2008 scandal involving tainted formula that killed six children and sickened more than 300,000 has prompted Chinese consumers to shun local brands and created huge demand for foreign products, both those sold through normal channels and those informally imported.

Buyers looking to supply Chinese consumers caused shortages of formula at retailers in several European countries and Australia earlier this year.

The government has vowed to crack down on safety violators and called for strict monitoring of milk powder production in an attempt to restore public trust in domestic companies.

But Shanghai mother Wan Leilei buys formula from Abbott Laboratories for her six-month-old son, saying she is undeterred by the higher price. "I, as well as most other Chinese, will spare no money when it comes to kids," she said.

"As long as I trust the brand... price changes, either up or down, do not affect my buying decisions that much."

Besides Wyeth, Danone and Abbott, other foreign companies being investigated by the NDRC include Mead Johnson Nutrition, and Dutch firm Royal FrieslandCampina, which produces the Friso brand, according to state media.

Mead Johnson said earlier this week it was "fully cooperating" with the enquiry and was providing products at "good value" to customers.

In a possible sign the investigation could stretch beyond baby formula, New Zealand's Fonterra said it had been contacted regarding a wide-ranging investigation into consumer dairy products, Dow Jones Newswires reported.

The Chinese government is under pressure to ensure quality products at reasonable prices following repeated food safety scandals, an analyst said.

"There is a bit of a tendency to direct extra attention at foreign firms," said Ben Cavender of Shanghai-based consultancy China Market Research Group.

"Any situation where it's being construed that companies might be selling premium products and artificially keeping prices up, there's going to be a backlash," he added.

Shares of the companies involved in the investigation, which has not been directly confirmed by the government, plunged in US trading on Wednesday.

Mead Johnson sank 8.1 percent while Abbott Laboratories fell 1.8 percent.


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Nestle unit cuts baby formula prices amid China probe
Shanghai (AFP) July 04, 2013
A unit of Swiss food giant Nestle is cutting prices for baby formula in China by as much as 20 percent, it said after the government launched a investigation into alleged price-fixing by foreign firms. Wyeth Nutrition confirmed the investigation by China's top economic planner, which has been reported by state media, and pledged to "immediately" cut prices on some formula products by six to ... read more

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