China Investigating Siemens’ Business Practices

SHIRLEY S. WANG - Siemens AG said Chinese authorities are probing its marketing and business practices there, in the latest instance of official scrutiny of foreign health-care companies.

The German maker of medical devices, among other products, said officials in the Shanghai branch of the State Administration of Industry and Commerce were looking into the marketing and business practices of its health-care laboratory diagnostics units. Its business practices are “common world-wide in the industry,” the company said in a statement.

Siemens denied media reports that it was subject to a corruption investigation. “Contrary to the recent media reports, the probe is neither corruption-related nor related to any personal benefits to individuals,” it said, adding that it is working with regulators and expects to resolve the matter “in the near future.”

Siemens didn’t elaborate further on the business practices being investigated.

Officials at the national-level State Administration of Industry and Commerce didn’t respond to a request for comment, while officials in the Shanghai branch couldn’t be reached.

In China, Siemens sells both medical equipment and biochemical tests, called immunoassays, which are used with the machines. The company’s business model, which is the same across the globe, is to allow customers to buy or lease the machine and additionally buy the chemicals, or to purchase the immunoassays separately at a higher cost to finance the machine, according to a person familiar with the practice. The company has halted the latter business approach while the investigation is under way, said this person.

The Chinese government has been scrutinizing the practices of various multinational pharmaceutical companies, most notably GlaxoSmithKline PLC. In September, a Chinese court found the U.K.-based company’s local subsidiary guilty of bribery and fined the drug maker nearly $500 million. Other pharmaceutical companies have publicly disclosed that they also have faced inquiries from governmental agencies for their operations in China.

The examination on the broader health-care industry comes as China has been overhauling its health-care system and trying to rein in costs. Hospitals and doctors were commonly paid commission for drug prescriptions, for instance. Though the government has tried to eliminate such practices, many experts say that problems remain.

—Kathy Chu and Laurie Burkitt contributed to this article.

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