Anti corruption in the healthcare industry: transparency may be a good "prescription" leadership | company | healthcare
Recently, there have been two news reports flashing across the screen. Firstly, the anti-corruption efforts in the pharmaceutical industry have led to the downfall of many hospital leaders; Secondly, Liu, Senior Vice President of Wanda Group, was taken away by the public security organs or related to internal anti-corruption efforts.
The two things share common characteristics, such as being involved in commercial bribery or corruption, and being considered illegal in behavior; Another reason is to attract attention due to being reported or investigated.
Strictly speaking, neither of these incidents can be considered news, because as early as 2013, some executives of the well-known multinational pharmaceutical company GlaxoSmithKline Investment Co., Ltd. were investigated in accordance with the law, the company was fined a huge amount, and relevant personnel were held criminally responsible, which also attracted widespread media attention at that time; And Wang Jianlin, the founder of Wanda Group, mentioned the company's anti-corruption practices in his 2014 autobiography "Wanda Philosophy". Data shows that multiple executives have been transferred to justice for several consecutive years.
Corruption is an illegal act and a cancer that affects the long-term healthy development of organizations, but it has become a global problem that is not only present in China, but also frequently seen worldwide. For example, the French giant Alstom was once investigated by the US government for commercial bribery, and the former executives involved were arrested in the US, and the company was eventually dismembered; Siemens, on the other hand, has been accused of bribery in Argentina, Venezuela, Vietnam, and even Iraq. In 2008, Siemens pleaded guilty to the US Department of Justice and the China Securities Regulatory Commission and agreed to pay a fine of approximately $800 million.
Looking at GlaxoSmithKline's annual report, the company's sales revenue for 2022 was £ 29.344 billion, sales costs were £ 9.554 billion, research and development expenses were £ 5.488 billion, and sales, management, and administrative expenses were £ 8.373 billion. Based solely on annual figures, the company's sales cost accounts for 32.56%; Research and development expenses account for 18.70%, and three expenses account for 28.54%.
These numbers are cold, but if compared to the figures from 2013, there will be some differences. For example, in 2013, which was investigated by the Chinese government, the company achieved a total revenue of 26.505 billion pounds, of which 7.549 billion pounds in costs, accounting for 28.48%; Research and development expenses amounted to 3.4 billion pounds, accounting for 12.83%; Three expenses amounted to £ 7.928 billion, accounting for 29.91%.
Of course, in the past 10 years, the company's product structure, market channels, and other aspects have undergone certain changes. The data itself may not be directly comparable, but it can reveal some basic facts that during this period, the company's costs have been increasing, investment in research and development has been increasing, and expenses for drug sales and other expenses have been decreasing. In more understandable terms, it means that the company spends more money on products rather than advertising, promotion, and conferences, and the structure of spending has changed, which may be more or less related to anti-corruption.
For example, the company candidly stated in its 2013 annual report that combating commercial bribery and corruption is one of the main risks it faces. For the investigation, the company believes that it is due to its own reasons, such as not being able to create a high-quality culture in the company and not making employees aware that commercial bribery and corruption are unacceptable behaviors; For example, the lack of well-established embedded processes to prevent commercial bribery and corruption also points the way for companies to prevent and detect corruption in the future.
By the way, let's take a look at the financial data of some pharmaceutical companies in China. One listed company named Lizhu Group was named this time. Its sales revenue in 2022 was 12.63 billion yuan, with a cost of 4.461 billion yuan, accounting for 35.32%. The expenses for sales and management expenses were 4.544 billion yuan, exceeding the cost, accounting for 35.98%; Research and development expenses amounted to 1.427 billion yuan, accounting for 11.3%. There is also an industry leader, Hengrui Pharmaceutical, mainly engaged in the production, sales, and research and development of anti-tumor drugs, surgical drugs, and contrast agents. In 2022, the sales and management expenses were 9.654 billion yuan, accounting for 45.38%; The R&D expenditure of Yunnan Baiyao, another industry leader, in 2022 accounted for only 0.92%. If we make a simple comparison, it can be basically seen that Chinese pharmaceutical companies have relatively high sales and management expenses, while relatively low research and development expenses. The reason for the high proportion of sales and management expenses is well known, and it is not surprising that anti-corruption in the medical industry has attracted widespread attention.
The problem is that the annual report information of listed companies is relatively public, and through simple data analysis, some gaps and tricks can be discovered. However, hospitals are rarely listed on the market, and data often cannot be made public, making it difficult to obtain market and public supervision. If there are tricks, they cannot be detected and corrected in a timely manner.
For example, patient information is private, and everyone's medical data is often confidential. At most, it feels difficult and expensive to see a doctor, but if it is expensive, it may not be clear why. Often, there is no way to compare with like-minded patients, and it is impossible to determine whether the money spent is reasonable.
What's even more tragic is that the need for medical treatment is a necessity, and people who eat grains and cereals inevitably have a headache and a fever, which inevitably requires seeking medical advice. If medical treatment is regarded as a form of consumption, this consumption is fundamentally different from that of consumers in economics, because ordinary consumers can decide whether to consume, and if the consumption price is high, they can choose not to consume; However, once the patient enters the hospital, it is difficult to decide whether to consume, and the consumer price is not the final say. It should be said that there is a great information asymmetry between the hospital or doctor and the patient. Therefore, the hospital or doctor can use these information asymmetries to seek their own private interests, while the patient often does not have the right to know or the right to choose.
Doctors are also human beings who need to support their families and have the right to pursue a better life. It is unrealistic to simply demand that doctors be gentlemen or saints in terms of morality. Therefore, it is necessary to establish corresponding institutional mechanisms, which not only enable them to obtain decent income, but also separate the economic expenses closely related to patient payment such as medicine, medical equipment, consumables, etc. from the personal interests of doctors, so that doctors can focus on medical treatment and patients can trust hospitals and doctors.
From the perspective of the enterprise, if identified as bribery, it is likely to suffer economic and reputational losses, and in severe cases, may even lose the ability to continue operating. Therefore, enterprises will establish corresponding policies, systems, and processes to regulate business behavior. At the same time, they will also take measures such as building corporate culture, training employees on values, investigating and severely punishing possible commercial bribery behaviors, etc. to cope with this risk.
From the perspective of a hospital, if it is identified as bribery, it will not be closed down. However, the implicit and explicit costs caused by bribery are often passed on to patients through examination fees, drug and consumables costs, which increases the financial burden on patients and greatly damages the trust between doctors and patients.
According to media reports, the bribery case of Luo Yong, former Secretary of the Party Branch and President of Tanzhou People's Hospital in Zhongshan City, Guangdong Province, was publicly tried in June 2023. The amount involved was over 29.8 million yuan, involving accepting patient red envelope gifts, kickbacks from pharmaceutical representatives, forming an "interest alliance" with medical equipment suppliers, and receiving high kickbacks from equipment agents. The kickbacks and inflated prices of medication and equipment are included in medical costs, directly leading to difficulties and high costs for the public to seek medical treatment. After the removal of the "medical beetle", the procurement cost of hospitals and the cost of medical treatment for the public have significantly decreased. According to statistical data, the average outpatient and inpatient expenses of the hospital from January to May this year decreased by 16.6% and 21.4% year-on-year, and the per capita medical cost decreased by more than 1400 yuan.
This data may have some flaws in theory, such as different patients, diseases, causes, treatment plans, and medication. Simply comparing data from different times may not be scientific, but people are willing to see the fact that the cost of medical treatment has decreased, and are more willing to link the cost of medical treatment with anti-corruption achievements.
From a theoretical perspective, corruption is a form of fraud, and the explanation for fraud is the "GONE" theory consisting of the first letter of four English words, namely greed, opportunity, demand, and exposure. Greed and demand are related to individuals, while opportunities and exposure are related to organizations.
Therefore, there is a prescription for the governance of fraud. For example, organizations should establish sound and strict internal controls. On the one hand, they should reduce the opportunities for key and sensitive personnel to do bad things, and on the other hand, they should be able to detect and punish these people in a timely manner when they do bad things; Individuals need to constantly improve their risk awareness, professional ethics, and overcome human weaknesses, and have a clear understanding of the consequences of fraud. For doctors, it is even more important to prioritize treating illnesses and saving lives, while putting economic benefits aside.
The struggle against fraud is often seen as a serious long-term strategy. It is necessary for countries, enterprises, and individuals to make eliminating fraud a key goal, and to have a clear understanding of the obstacles and challenges that exist in the process of achieving the goal, so as to find effective ways to prevent and timely detect potential risks.
For the anti-corruption of the medical industry, due to the significant information asymmetry and the involvement of a wide range of people's interests, it should be directly intervened by the government, rather than relying solely on the perspective of organizations and individuals. In terms of focus, you can put more effort into "exposing" appropriately, as long as you are corrupt, you will be discovered; Once discovered, strict punishment will be imposed.
Fraud governance is a systematic, long-term, and even strategic project. This first requires an authoritative investigation department, such as establishing an authoritative anti-corruption agency similar to the Hong Kong Independent Commission Against Corruption in China; It also needs technical support, such as the application of "Internet plus+supervision"; It is even more necessary for the broad support of the people, such as full participation by all staff. Once corruption is discovered, they know who to report to, and after knowing the report, they can receive timely response and treatment. The media has revealed that there have been cases where a wife reported her husband, who is a doctor, for wrongdoing under her real name.
Transparency may be a good remedy for addressing corruption in the healthcare industry. For example, let each hospital publicly and transparently disclose some information like a listed company, and according to the information needs of patients, disclose the recovery rate, average outpatient and inpatient expenses, and per capita medical costs of each disease, so that patients and the people can achieve clear and transparent consumption. An information platform can also be established, allowing patients to disclose their medical costs for comparison and identification.
Recognizing the public welfare nature of medical services, doctors are more focused on treating illnesses and saving people, while pharmaceutical companies are more focused on drug research and development. Stakeholders form reasonable expectations, such as compliance with laws and regulations, diligence and responsibility, which can yield good returns. Violation of laws and regulations, bribery, and accepting bribes may lead to personal ruin. If all information can be made public and transparent, then there is a chance to achieve the goal of "the way of heaven is to benefit without harm; the way of human beings is to strive for excellence".
