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Shanghai Pharma opens bribery probe after whistleblower report

By Adam Jourdan

SHANGHAI (Reuters) - Chinese drugmaker Shanghai Pharmaceuticals Holding Co Ltd said it is investigating an allegation in local media that a subsidiary bribed hospital and industry staff to boost drug sales.

The subsidiary paid 766,500 yuan ($126,200) in bribes between January and June this year to staff at 31 hospitals in the eastern city of Qingdao, the 21st Century Herald newspaper reported on Tuesday, citing documents shown to it by an unidentified whistleblower.

Regulators have probed numerous domestic and international drugs firms this year, with investigations into the pharmaceutical sector ranging from alleged corruption to how drugs are priced.

The most high-profile investigation involves GlaxoSmithKline PLC, Britain's largest drugmaker.

Shanghai Pharmaceuticals has opened a probe into the alleged bribes by subsidiary Qingdao Growful Pharmaceutical Co Ltd, the Shanghai-listed firm said in a statement to Reuters.

"As soon as we confirm the truth of the matter, we will set up systems to investigate further and adopt the necessary measures according to Chinese law and the firm's internal policies," it said in the statement.

"The company has always taken a zero-tolerance attitude towards putting a stop to illegal and unprincipled behavior."

The parent drugmaker, which had revenues of 68.1 billion yuan ($11.21 billion) last year according to its annual financial report, holds nearly 70 percent of Qingdao Growful.

Qingdao Growful paid doctors to prescribe its "Hong Yuan Da" iron deficiency medicine, the 21st Century Herald reported.

The payments covered thousands of patients, the newspaper reported citing documents showing payment amounts and dates, doctor and patient names, as well as hospital details.

There has been a series of allegations in the media since the GSK investigation started in July, with a number of whistleblowers making a beeline for the 21st Century Business Herald.

The newspaper quoted whistleblowers in August this year saying U.S. drugmaker Eli Lilly and Co, Swiss drugmaker Novartis AG and French company Sanofi SA had paid bribes to doctors to boost drug sales.

Hong Kong-listed Sino Biopharmaceutical and privately held Gan & Lee Pharmaceuticals, of which Goldman Sachs Group Inc holds a stake, have also come under the spotlight for improper payments to doctors.

Corruption in China's pharmaceutical industry is widespread, fuelled in part by low base salaries for doctors at the country's 13,500 public hospitals.

Shanghai Pharmaceutical shares ended down 4.9 percent on Tuesday, compared with the wider CSI300 index which fell 0.5 percent.

($1 = 6.0715 Chinese yuan)

(Additional reporting by SHANGHAI newsroom; Editing by Kazunori Takada and Christopher Cushing)

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